UnitedHealthcare Says It Will Pass On Rebates From Drug Companies to Consumers

By Reed Abelson
The New York Times
March 6, 2018

In response to growing consumer frustration over drug prices, UnitedHealthcare, one of the nation’s largest health insurers, said on Tuesday that it would stop keeping millions of dollars in discounts it gets from drug companies and share them with its customers.

Dan Schumacher, the president of UnitedHealthcare, said the new policywill apply to more than seven million people who are enrolled in the company’s fully insured plans, beginning next year.

“The benefit could range from a few dollars to hundreds of dollars to over a thousand,” Mr. Schumacher said.

Not all drugs come with rebates that are paid to the health plan. People in plans with high deductibles who buy drugs that carry large rebates will see the greatest savings, Mr. Schumacher said.

Insurers like UnitedHealthcare, whose parent company also owns a large pharmacy benefit manager, OptumRx, have come under increasing public pressure as drug prices — especially for brand-name drugs — continue to rise, angering consumers and lawmakers. The decision by UnitedHealthcare is the latest in a series of steps taken by drug makers and health plans to try to lessen public discontent over drug prices, even as the companies spar over who is to blame.

Aiming to deflect criticism, the pharmaceutical industry has increasingly pointed the finger at both insurers and pharmacy managers for not sharing the rebates with customers filling prescriptions. The Pharmaceutical Research and Manufacturers of America, the industry trade group, rolled out an advertising campaign, “Share the Savings,” last year to make the case that by passing on the discounts, plans could significantly lower patients’ out-of-pocket bills. The group called UnitedHealthcare’s decision “a step in the right direction.”

Insurers, including UnitedHealthcare, contend that they already use the money from discounts to lower premiums for all their customers, and argue the real issue is the high cost of so many drugs.

But UnitedHealthcare seems to have blinked, signaling what could be a coming shift away from the system of convoluted deals struck between the drug companies and these middlemen, said Adam J. Fein, president of Pembroke Consulting, a research firm. Although the new policy will only affect a fraction of the company’s customers, “it’s one more step on the path of creating a more transparent pharmacy supply chain,” Mr. Fein said.

The amount of rebates can vary widely, with some drugs, like Humira and Enbrel that treat rheumatoid arthritis, being deeply discounted. Others, like medicines for rare conditions where there is no significant competition, have little to no rebates. Patients, employers and the public have little information on what any one drug costs and whether the discounts ultimately flow back to customers.

“The industry is taking criticism from a lot of different people,” said Erik Gordon, a business professor at the University of Michigan. It is significant that UnitedHealthcare “felt compelled to do something,” he said.

The Trump administration recently floated the idea of requiring private drug plans under Medicare to pass on the savings to consumers at the pharmacy counter. On Tuesday, Alex M. Azar II, a former executive at Eli Lilly and the new secretary of health and human services, called UnitedHealthcare’s move “a prime example of the type of movement toward transparency and lower drug prices for millions of patients that the Trump administration is championing.”

But insurers have resisted the idea that they be forced to pass on the savings in Medicare drug plans, arguing that it would result in significantly higher premiums for everyone. Federal officials estimate that consumers buying the drugs would save, on average, from $45 to $132 a month under the proposal. But then premiums for all Medicare beneficiaries would increase anywhere from an estimated $14 to $44 a month.

UnitedHealth Group, UnitedHealthcare’s parent, opposes the Medicare proposal because it would raise premiums sharply for older people.

By contrast, the company’s plans offered through private employers would have a minimal effect on premiums, Mr. Schumacher said. “The benefit to the individual is meaningful.”

Employers who self-insure already have the option of passing the discounts onto customers, Mr. Schumacher said. CVS Health, a large pharmacy benefit manager, allows employers to share the discount with their workers and has offered rebates to its own employees since 2013. OptumRx also offers the option of sharing the discount directly with consumers.

But while some employers seem interested, it has not taken off, Mr. Schumacher said. “We have some customer interest,” he said. “It’s in the early innings.”

While some employers want to keep the savings, more are becoming concerned about how these large rebates affect people taking expensive medicines who are in high-deductible plans or pay a significant percentage of every prescription they fill, said Edward A. Kaplan, a senior vice president at Segal Consulting. The rebate “is such a big number,” he said.

The shift to choosing to share those savings with the employees filling these prescriptions “is beginning to happen slowly,” he said.

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