The Rebate Wall: Why Chasing Pharma Rebates Can Block Better Patient Care

Jun 19, 2025

19:27

Pharma & Biotech Precision Medicine Disability & Accessibility

Episode Description

Per-employee rebates paid to employers have increased almost threefold since 2017. Over that same period, total drug costs still rose by nearly 24%. So what exactly are those rebates buying? That's the uncomfortable question at the center of this Summer Short.

In this Summer Short Stacey Richter speaks again with Ann Lewandowski — nationally recognized healthcare executive and whistleblower known for the Lewandowski v. Johnson & Johnson case — about the nuances of pharma rebates, or as Lewandowski prefers, post-sale concessions. The conversation focuses on a less-discussed consequence: the rebate wall that blocks plan sponsors from implementing pharmacogenomics testing to determine whether a drug will actually work for a given patient.

WHAT YOU'LL LEARN
✅ Why "rebate" is linguistic gymnastics — PBMs can receive post-sale concessions from manufacturers and classify any portion of those dollars as a rebate, making "100% rebate passthrough" a relatively meaningless guarantee

✅ Why rebates are classified as trade secrets by pharma and PBM companies, and why even state reporting laws like Minnesota's aggregate the data in ways that prevent meaningful scrutiny

✅ How direct-to-label agreements work: manufacturers use rebate dollars to lock in formulary placement without prior authorization criteria, and those agreements are tied to the existing FDA label — which often does not require pharmacogenomics testing

✅ The rebate wall in practice: one study cited by Ann Lewandowski found that pharmacogenomics testing can reduce ER visits for medication interactions by 42% — but if a plan sponsor adds pharmacogenomics testing requirements beyond what the label specifies, they forfeit the rebates

✅ The disability dimension most plan sponsors miss: beyond life-threatening drug interactions, being on the wrong medication can accumulate disability over time — with downstream costs to employer-sponsored long-term disability policies that rarely get factored into the rebate math

✅ Why biosimilars and low-list-price products are the exit ramp: they remove the Sophie's Choice between chasing rebates and building a value-based formulary that actually gets the right medication to the right patient

WHY THIS MATTERS
About 50% of Americans are not taking essential medications due to affordability — a figure Stacey cites from a Milliman analysis referenced by Peter Hayes. When rebates reduce premiums for healthier members while sicker patients pay full list price for medications, it functions as a regressive tax on illness. And when those same rebate structures block pharmacogenomics testing that could prevent hospitalizations, disability, and avoidable drug harm, the cost to plan sponsors compounds well beyond the line item for drug spend.

=== LINKS ===
🔗 Show Notes with all mentioned links:
https://cc-lnk.com/SUMS10

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter:
https://relentlesshealthvalue.com/join-the-relentless-tribe

🫙 Support the podcast with a small donation to the Tip Jar:
https://relentlesshealthvalue.com/join-the-relentless-tribe

📺 Subscribe to our YouTube channel https://www.youtube.com/@RelentlessHealthValue

🎤 Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/feed/id892082003?ls=1

🎤 Listen on Spotify https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b

=== CONNECT WITH THE RHV TEAM ===
✭ LinkedIn https://www.linkedin.com/company/relentless-health-value/
✭ Threads https://www.threads.net/@relentlesshealthvalue/
✭ Bluesky https://bsky.app/profile/relentleshealth.bsky.social
✭ X https://twitter.com/relentleshealth/

0:00 Introduction

07:24 What is a pharmaceutical rebate?

08:15 Why are pharma rebates so opaque?

09:52 Texas lawsuit on insulin pricing.

10:18 Why is focusing on a singular type of concession difficult with current pharma rebate structures?