UnitedHealthcare to pass drug rebates to consumers

With irritation building among consumers over the high price of medications, Minnetonka-based UnitedHealthcare said Tuesday it would start providing discounts to millions of consumers at the pharmacy counter via rebates that currently are factored into overall health plans costs.

Once it starts next year, the program will apply to a subset of all employer groups that buy coverage from UnitedHealthcare, which is the nation's largest health insurer, and the savings per prescriptions will vary.

Other health plans in Minnesota said Tuesday they were considering whether to follow suit, which comes amid an ongoing battle between insurers and drug manufacturers about which sector is to blame for sticker shock at the pharmacy counter.

"Today's announcement by UnitedHealthcare is a prime example of the type of movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing," said Alex Azar, the secretary of the U.S. Department of Health and Human Services, in a statement.

UnitedHealthcare is introducing the program in conjunction with OptumRx, the company's in-house pharmaceutical benefits manager (PBM). In recent years, PBMs have been calling attention to a "gross-to-net bubble" that's worth about 10 percent of all pharmacy spending, or $37 billion, according to a June 2017 report from the consulting firm Mercer.

In 2011 and 2012, PBMs developed formularies to steer consumers to certain medications where manufactures provide significant rebates to insurers, a Mercer analyst wrote. Over time, the difference between the pre-rebate and post-rebate costs for these medications has become significant.

The dynamic led to unintended consequences, Mercer says, because rebates go directly to the health plan as opposed to individual subscribers, many of whom have high deductibles.

Pharmaceutical companies allege that PBMs have been keeping too much of the rebate money, and launched last year a public awareness campaign called "Share the Savings." On Tuesday, a spokesman for the trade group representing drug manufacturers called the UnitedHealthcare policy "a step in the right direction."

"Today's announcement is the latest development in the ongoing conversation around the role of middlemen, like pharmacy benefit managers and insurers, in determining what a patient pays out-of-pocket," said Nick McGee, a spokesman for PhRMA, via e-mail.

The trade group for many national health insurers said it would not directly comment on UnitedHealthcare's policy, but said drug companies were trying to distract people from the core problem with medication costs by focusing on how insurers handle rebates.

"The bottom line is the original price of a drug — which is solely determined by the drug manufacturer — drives the entire pricing process," said Cathryn Donaldson, a spokeswoman for America's Health Insurance Plans, in an e-mail.

UnitedHealthcare did not refer to the dispute in its announcement on Tuesday. The company described the move as part of a broader effort to simplify pharmacy benefits for customers.

The rebates will kick in next year for more than 7 million people in employer groups that purchase "fully-insured" coverage from UnitedHealthcare, meaning the employers pay the insurance company to take the financial risk for medical costs.

It doesn't apply to the nearly 19 million people in a group health plan where UnitedHealthcare provides administrative services to "self-insured" employers that take the financial risk for medical claims. In those plans, employers already have the option to provide rebates to individual consumers at the pharmacy counter, according to UnitedHealthcare.

Last year, roughly two-thirds of employers in a national survey said they were using rebates to reduce overall health plan spending on drug costs, while 11 percent said they were reducing out-of-pocket costs for individuals, according to the Pharmaceutical Benefit Management Institute.

Bloomington-based HealthPartners doesn't have a program like the one announced Tuesday by UnitedHealthcare, but officials "have been exploring it," said spokeswoman Catherine Scott via e-mail.

At Minnetonka-based Medica, spokesman Greg Bury wrote in an e-mail: "We currently manage drug rebates so that all of our members benefit from them. We will continue to monitor other approaches to see if there are more effective means of managing drug costs while still benefiting all."