Many employers are unknowingly collecting drug rebate money that is funded by their sickest workers, according to Mark Cuban.
During Forbes’ Healthcare Summit last week in New York City, Cuban noted that Americans are often paying full list prices during their deductible periods, effectively subsidizing the rebates that flow back to pharmacy benefit managers and employers. This is a dynamic he argues most CEOs don’t fully understand.
Cuban pointed to a common scenario: an employee enrolled in a high-deductible health plan receives a prescription for a brand-name drug like Eliquis, which can retail around $600 a month. Until the employee meets their deductible, they have to pay that full list price — even if the PBM has negotiated a substantial rebate on the drug.
That rebate, which can amount to hundreds of dollars per prescription, never makes its way back to the patient footing the bill. Instead, the money goes through the PBM and ultimately back to the employer, Cuban explained.
To him, this structure flips the intent of rebates on its head. Rather than lowering costs for the people who need the medication, this system ends up using those patients’ high out-of-pocket payments to generate rebate checks that benefit their employer. Cuban warned that by profiting from rebates funded by sick workers, companies could be falling short of their obligation to act in employees’ best interests under the Employee Retirement Income Security Act.
He highlighted direct-to-employer drug purchasing models as a way to avoid this issue.
His company, Cost Plus Drugs, is developing direct-to-employer drug programs designed to bypass PBMs and secure net pricing. This way, employees aren’t subsidizing rebates with their own medical bills, Cuban stated.
“I sit with the CEO, and I say, ‘Look, you are getting ripped off by your PBM. And I understand it’s difficult to just move, but there are a growing number of direct-to-employer programs that are being created,’” he remarked.
One of Cost Plus Drug’s partners for its direct-to-employer drug pricing model is CenterWell, Humana’s healthcare services brand.
Humana CEO James Rechtin noted that CenterWell wants to simplify its drug supply chain to deliver medications more efficiently and transparently. The company is doing more contracting directly with manufacturers so consumers and employers can see the true net cost of drugs and eschew the layers of intermediaries that drive up prices.
“With pharmacy, we basically looked at the traditional model, and we said, ‘We are not getting the cost efficiency, the affordability, that we need to to make sure that our members are getting access to medications,’” he said.
If efforts to eliminate the middlemen continue to scale, workers could save billions in out-of-pocket costs, Rechtin and Cuban agreed.
Photo: mathisworks, Getty Images
