Encore! EP365: The Real Deal With PBM Contracts and Drug Rebates, With Scott Haas

The Truth About PBM Rebates and Formulary Exclusions, With Scott Haas (Encore EP365)

Why "Rebate" in a PBM Contract Can Mean Whatever the PBM Wants It To. Encore Episode 365.

Only about 40% of the dollars a PBM collects from a pharma manufacturer's so-called rebate actually make it back to the plan sponsor as a rebate — the rest gets renamed an administration fee, a data fee, or a clinical program fee. In this encore episode, Stacey Richter revisits her conversation with Scott Haas, senior VP at USI Insurance Services, about how PBM rebate contracts actually work, why formulary exclusions punish cheap generics, and what it takes to negotiate a PBM contract with real, absolute pricing terms.

WHAT YOU'LL LEARN

✅ How the two-part rebate transaction works: pharma pays the PBM cash back to get formulary access, then the PBM promises to pass "100% of rebates" back to the plan sponsor — except only about 40 cents of every rebate dollar is actually labeled a rebate

✅ Why one insulin manufacturer's $350 list price per script nets out to just $52 after rebates — an 86% cut that shows how large the gross-to-net bubble has gotten

✅ Why cheap generics get excluded from PBM formularies in favor of expensive brands: generics don't carry rebates, so PBMs lose money when a high-rebate specialty drug goes generic

✅ Why Scott Haas says the only fix is a PBM contract that defines actual dollar prices per unit — not percentages off AWP or WAC, either of which can shift at any time

✅ How GPOs the "Big Three" PBMs have spun up further aggregate and maximize the rebate dollars at stake

WHY THIS MATTERS

The word "rebate" has become close to meaningless in PBM contracts, since a PBM can define it however it wants — which means a plan sponsor promised "100% of the rebates" can still be paying far more than it thinks. Scott Haas's bottom line is simple: whoever controls the definition of the deal controls the price, so plan sponsors need contracts with real, absolute dollar figures instead of percentages and acronyms that can quietly shift over time.

MENTIONED IN THIS EPISODE

EP342 with Christin Deacon: Apple Podcasts | Spotify | Other Apps

=== LINKS ===

🔗 Show Notes with all mentioned links: Episode Page

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00:00 Introduction

10:34 What's the major flaw with the buyer-seller relationship between plan sponsors and PBMs?

12:08 What are the five things that need to be considered in order to get a fair price from a PBM?

13:21 Why does using average wholesale price cause problems for plan sponsors?

15:10 What does it mean to put the network risk on the PBM?

17:15 What's happening with drugs moving from specialty brand to specialty generic?

19:19 "A generic is a generic; in our world, it's binary."

23:36 "The term 100% of rebates is really irrelevant."

23:59 What does it mean to have a minimum guarantee in drug rebates?

26:43 "When you do a line-item assessment … is it producing an optimal result in comparison to competitively achieved … pricing for generics … and for specialty?"

27:57 "Plan sponsors need to grow a backbone."

29:10 Why do you need to understand your consultant's process as a plan sponsor?

29:36 Why do you need to understand formulary exclusions as a plan sponsor?

29:46 Why is it important to create a more equal PBM contract?

30:57 "Rebates inure to the benefit of the plan sponsor; they don't necessarily benefit the consumer."

31:50 What does Scott do at USI?