Rebates Aren't Savings. They're a Refund.
Recent legislation requiring PBMs to pass through 100% of rebates is being positioned as a win for transparency. And in some ways, it is. Plan sponsors deserve visibility into where pharmacy dollars go. But it’s not the finish line.
Rebates can serve a purpose. In markets filled with single-source brands, they are one of the few tools that can force manufacturers to compete. But rebate pass-through, no matter how well-intentioned, still measures success by the wrong metric. When rebates become the scoreboard, the system can reward the wrong choice. Bigger rebates can still lead to higher net costs, distorted formulary decisions and utilization that isn’t always tied to outcomes.
Lower Rebates Aren’t Necessarily a Bad Thing
Imagine buying a product that’s marked up above its true value. At checkout, you receive a refund that gives you a portion back. Technically, you saved but only because the original price was wrong. That’s the rebate system.
Or consider a more familiar comparison. You buy the brand product because you have a coupon, even though the generic costs less without any discount. The coupon feels like savings, but the total cost tells a different story.
That’s how rebates can distort decision making in the traditional PBM model. A drug with a high rebate may still cost significantly more than a clinically appropriate alternative. When rebates are treated like the scoreboard, the system can reward the wrong choice.
The most important question plan sponsors should be asking isn’t, “How much rebate did we get back?” It’s, “What did we actually pay?” When rebates become the primary measure of success, they steer decisions toward rebate potential instead of lowest net cost. The result is plan sponsors and members paying more while being told they’re saving.
What Plan Sponsors Should Focus on Instead
Rebates are a financial mechanism. Net cost should be the strategy. The real measures of controlling trend and improving the member experience are clear:
– Lowest net cost
– Clinically appropriate utilization
– Strong generic and biosimilar adoption
– Total cost of care impact
– Member affordability at the point of sale
Because you can “win” on rebates and still lose on total cost.
Think Beyond Rebates. We Have.
At WellDyne, we’ve never believed the goal was to chase the biggest rebate. The goal is to build a model where the lowest net cost wins. One where clinical integrity and consumer decision making aren’t compromised by murky pricing games.
That’s not a reaction to change. It’s how we’ve always believed pharmacy benefits should work. When incentives are aligned, the math is simple. Lower net cost wins and better outcomes follow.
Rebate pass through is progress. But if we want real affordability, we need to think beyond rebates. We have.
