Health insurer to expand rebate program for Rx drugs

Health insurance giant United Healthcare said Tuesday that it will expand a program that passes rebates from drugmakers directly to consumers.

The company said the voluntary program, which began this year, has already lowered drug costs for consumers by an average of $130 per eligible prescription, and that the expansion could lower costs for many who have struggled with high deductible payments and other out-of-pocket expenses for prescription medicine.

United said the expanded plan would take effect next year and would be required for all new employer clients, although existing clients would be permitted to continue under the older system. Those clients will be “encouraged” to adopt the new plan when their contracts expire but will not be required to do so, according to Matthew Stearns, a spokesman for Optum Rx, the pharmacy benefit manager that is owned by United.

Other insurers have offered employers the option to apply the after-the-fact discounts, called rebates, to consumers’ out-of-pocket expenses, but United appears to be the first major insurer to require it of new clients.

“This expanded point-ofsale discount program demonstrates our commitment to delivering better prices for consumers,” John Prince, chief executive of Optum Rx, said in a statement.

Pharmacy benefit managers typically negotiate rebates from pharmaceutical companies to help offset the high initial prices set for many drugs. But those discounts rarely flow directly to the

people filling prescriptions.

Instead, they are often passed on to companies that sponsor employee insurance plans and are used to reduce premiums or offset other plan costs.

But those high list prices can hurt the patients buying the medications because what they have to pay for the drug out of pocket is based on that initial list price, not the after-rebate cost.

Drug rebates have become a growing point of contention as the cost of medical care and prescription drugs rises. The federal government has said those hidden rebates can amount to up to 30 percent of a drug’s list price.

Health and Human Services Secretary Alex Azar has pushed to turn them more into upfront discounts the customer gets when paying for the drug. He has said that would create pressure on

drugmakers to keep prices down.

Leerink analyst Ana Gupte said in a research note that she expects other health plans to follow United Health’s lead in requiring more rebates to be offered directly to the patient.

United Healthcare is the insurance arm of United Health Group Inc., which is based in Minnetonka, Minn.

As consumer anger over drug prices has grown, pharmaceutical companies and insurers have increasingly pointed fingers at each other, with drug companies accusing insurers of profiting from their share of the rebates they collect, while insurers say the manufacturers are the ones who decide what a drug costs. Both industries have come under scrutiny by President Donald Trump’s administration and members of Congress, and the industries have struggled to show that they are doing something to address the issue.

In January, the Trump administration proposed a

similar move for government health care programs like Medicare. Under the proposed rule, pharmacy benefit managers would lose the legal protections that allow them to accept rebates from drug companies for brand-name drugs covered under the Medicaid and Medicare government programs. Any such discounts would instead have to be credited at the pharmacy counter when patients fill a prescription.

United said its analysis of employers that have voluntarily adopted such a program shows that consumers are more likely to fill their prescriptions, which can improve their health.

Employers and insurers have typically used rebates to lower premiums for all members, and under the Trump plan, Medicare beneficiaries’ drug-plan premiums are expected to rise slightly.

Stearns, the Optum Rx spokesman, said that the company expects the new requirement will result in “modest increases” in premiums, which he said would be in the low single digits.

“But it will also put money back in consumers’ pockets,” he said.