What drug characteristics explain the wide range of manufacturer rebates?

Abstract

Introduction: Prescription drug list prices, often cited in policy discussions, do not account for rebates negotiated between manufacturers and payers.

Methods: This study examines factors influencing rebates in the United States, focusing on specialty drugs-ie, high priced therapies (often biologics) for which payers issue specific coverage policies. Rebate data came from SSR Health and drug attributes from the Tufts Medical Center Specialty Drug Evidence and Coverage Database. We stratified rebate data by drug type and characteristics.

Results: We identified 161 drugs found in SSR Health and SPEC as of December 2023. We found that rebates vary substantially across drugs (median of 27%, IQR 16%-53%). Biosimilar and originator drugs have the highest, most variable rebates (median of 71%, IQR 53%-79%), while rebates for cancer treatments and orphan drugs are lower (medians of 19% and 23%, respectively) and vary less (IQR of 12%-28% and 14%-29%, respectively). Drugs that face more competition from alternative options within the same therapeutic class, are self-administered, or received Food and Drug Administration approval further in the past have higher rebates.

Conclusion: Our findings indicate that rebates are sizeable and vary along several dimensions, many relating to market competition, complicating policy discussions around drug pricing.

Keywords: health economics; prescription drug prices; rebates; specialty drugs.

Figure 1.

2023 median rebate (%) by drug type. Source: Authors’ analysis of SSR Health, LLC rebate data for 161 specialty therapies, stratified by drug type. Notes: Rebate percentages represent 4-quarter moving averages for calendar year 2023. IQRs are presented in parentheses.

Figure 2.

2023 median rebate (%) by drug characteristic. Source: Authors’ analysis of SSR Health, LLC rebate data for 161 specialty therapies, stratified by drug characteristic. Notes: Rebate percentages represent 4-quarter moving averages for calendar year 2023. IQRs are presented in parentheses.