Drug Rebates Do Not Increase Costs to Consumers

Abstract

Ascribing a portion of the blame for high drug prices on the system of manufacturer rebates misconstrues the nature of the market for prescription drugs. We submit that these rebates are the product of a healthy negotiating process between pharmacy benefit managers and manufacturers, one that serves to inject a modicum of market discipline into a market where it would be otherwise absent. We see no reason that abolishing such a system would result in lower drug prices, and suggest that the most likely outcome from such a prohibition would be another, more convoluted system that imprecisely replicated the rebate system.