Create by the AMCP School of Pharmacy Relations Committee Updated December 2021 What is a Rebate A rebate is a payment provided by the pharmaceutical manufacturer to the insurer as part of a formulary status agreement ID: 1048477
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1. Formulary Manufacturer ContractingCreate by the AMCP School of Pharmacy Relations CommitteeUpdated: December 2021
2. What is a Rebate?A rebate is a payment provided by the pharmaceutical manufacturer to the insurer as part of a formulary status agreement.Rebates may be:Flat rateMarket share drivenOutcome basedRebate revenues are shared byHealth PlanPharmacy Benefit Manager (PBM)Employer groups
3. Formulary Contracting ProcessThree prime componentsClinical FinancialQuality
4. Preliminary PlanningMember plansGauge interestMember populationClinical viewpointPre-approval Information Exchange (PIE)Review of AMCP Dossier and Budget Impact ModelProduct viabilityClass comparisonSize of marketMaturity of classUnmet NeedRebate potentialMinimum threshold
5. Rebate Offer Review ProcessClinical
6. Formulary Development: FinancialFinancial objectivesIdentify rebate potentialPursue rebate opportunitiesFinancially model different strategiesMake recommendations based on financial benefitProcess InitiationPharmaceutical Benefit Manager (PBM)/Managed Care Organization (MCO) send out requests for rebate offersManufacturer submit offerMeetings set to review offers and clinical informationClinicalTrade
7. Financial: Payer ConsiderationsProduct priceAverage Wholesale Price (AWP)Wholesale Acquisition Cost (WAC)Member CostFormulary Tiering (Preferred, Non-preferred, Specialty)Current market shareRebate offerPotential Utilization Management Restrictionsstep-edits, prior authorizations, etc.Cost considerationsPricingProduct price alone (before rebates)Product compared to other agents in classAbility to move shareClass and disease state dynamicsLine of Business (Commercial, Medicaid, Medicare Part D)Formulary StrategyMore expensive product vs. less expensive productCost after rebate relative to others in class (net cost)
8. Financial: NegotiationLeverage opportunities for PayersDrug differentiatorsOrganization size and scaleClinical landscape shiftGeneric availabilityFormulary strategyOpenClosedWorking relationshipExisting Product portfolio
9. Financial: NegotiationNovel agentAdvantage: ManufacturerNo therapeutic alternativesNo generic horizonLimited Utilization Management (UM) or other managementPriced at a premiumOffset future medical costsLimited competitionOne of manyAdvantage: PayerMay not be first lineCan prefer competitorsShift market shareGarner additional rebates for Brand medicationsDrug Differentiators
10. Financial: NegotiationPayerBulk BuyingMore covered plansMore covered livesMore pivotal in market share battlePharmaceutical ManufacturerLarger organizationMore productsLarger market shareMarket Basket contractingPipelineOrganization Size and Scale
11. Financial: NegotiationPositive data Advantage: ManufacturerFirst line agentUnmet medical needImproved member health outcomesSafety improvementsPrescriber demandFlexible dosingNegative dataAdvantage: Payer Market share declinesMore restrictionsOther therapies more favorableLess prescriber demandIncreased price concessionsClinical Landscape Shift
12. Financial: NegotiationOpenAdvantage: ManufacturerDrugs managed via formulary edits (ST, PA)Drug Tiering criticalLimited New to Market blocksClosedAdvantage: PBMNon-formulary = no accessLimit agents in class to maximize valueNew to Market products immediately blockedFormulary Strategy
13. Other ConsiderationsContractPrice ProtectionPortfolio Agreement (“Bundling”)Utilization management restrictionsInterdepartmentalClinicalFinancePayment TermsMonthly vs. Quarterly rebate settlements
14. Formulary RestrictionsUtilization Management RestrictionsNot Covered is the most restrictiveDrug covered with PA/ST less restrictiveRestrictiveness in relation to competitors can be beneficialExample: 3 plans-one metropolitan areaPlan A: most restrictive formulary; 1M membersPlan B: similar to A but less controls; 3M membersPlan C: similar to B but with even less control; 5M membersWhich formulary is most influential?
15. Financial: Bundle ContractsGreater discounts if all drugs on formularyExample: drugs A, B, and CRebate for each on formularyA-$20; B-$10; C-$25Rebate for all on formulary (must all be on)A-$23; B-$12; C-$30Why might this be a problem?
16. Value Based ContractingDefinition: Leveraging the amount of rebates based on a clinical outcome.Example: A manufacturer claims that a new bisphosphosphonate will reduce bone fractures by 10% compared to the leading preferred formulary agent. If this does not occur after one year, the manufacturer will have to provide the healthplan a higher rebate amount.
17. Final RecommendationsInternal reviewInvolve other departments (Ex. Clinical, Finance)Prepare recommendation (includes financial, clinical, and member impacts)Recommendation/DecisionPull-through efforts for member transitionComplete contractReview with Legal departmentsSign and ExecuteLoad financial terms into invoice system
18. Questions?
19. Financial: Analysis Case StudyScenario #1- a new drug, Eyedrator, is being released for the treatment of dry eyes. The AWP for one month of Eyedrator is $158. Two competitive products, Aquaretina and Moistinator are priced at $123 and $115 respectively. A rebate in the amount of $10 per script is being offered by the manufacturer. Your clinical team says all three products are interchangeable. The member plan has a copay differential of $20. Should you add this agent?
20. Financial: Analysis Case StudyScenario #2- A new drug, Slo-gut,is being marketed for the treatment of chemotherapy induced diarrhea. The cost of one course of therapy for Slo-gut is $84. Another drug in the same class, Stabilify, has a cost per course of $128. Your clinical team says Slo-gut and Stabilify are interchangeable. The manufacturer of Slo-gut is not offering rebates at this time. Stabilify currently has a rebate of $30 per prescription. The copay differential is $18. Should you add Slo-gut?
21. Financial: Analysis Case StudyScenario #3- A new benzodiazepine, Settledownin, is being released by a new manufacturer. The cost of one month of Settledownin for the treatment of generalized anxiety is $40. The manufacturer is offering a rebate of $15 per script. The copay differential is $10. Your clinical team says that Settledownin is similar to other benzodiazepines in terms of efficacy and safety. Should you add Settledownin to the formulary?
22. To improve patient health by ensuring access to high-quality, cost-effective medications and other therapies. Mission & Vision
23. Thank you to AMCP member Kheelan Gopal for updating this presentation