The Rebate Wall: Why Chasing Pharma Rebates Can Block Better Patient Care with Ann Lewandowski - Summer Short

So much can be said about pharma rebates — or, as Stacey Richter puts it after this conversation, monies received back from manufacturers, or post-sale concessions — that the word "rebate" itself has become linguistic gymnastics. Some of these dollars don't always get called a rebate, and some wind up in the pocket of the PBM/GPO or the TPA/EBC instead of the plan sponsor — allegedly, per the whistleblower case in which $27 million of someone else's rebates is alleged to have ended up in an executive bonus pool (hear that story on EP476 with Ann Lewandowski). Much has already been said on Relentless Health Value about pharma rebates, with Scott Haas, Mark Cuban, Chris Sloan, Pramod John, PhD, and Paul Holmes, among others, so this Summer Short instead rounds up what's being written about rebates right now, then digs into a nuance that gets little attention: how rebate-driven contracts can block the very pharmacogenomic testing that would otherwise catch a mismatched medication before it causes harm. An article by Austin Chelko notes that per-employee rebates paid to employers have nearly tripled since 2017, yet total drug costs have still risen almost 24% over that same period — because, as Chelko writes, rebate-driven contracts block employers from pursuing lower-cost generics and biosimilars, incentivize PBMs to support clinically immaterial patent extensions, and let PBMs hit whatever guarantee they set for a given employer through formulary changes, cross-subsidized guarantees, and MAC manipulation (hear more on this from Chris Crawford on EP465). Rebate deals also routinely push genetic testing off the table: a manufacturer's rebate is often tied to a drug's existing FDA label, so a plan that starts limiting prescribing based on a pharmacogenomic test beyond what that label allows can forfeit the rebate entirely. In this Summer Short, Stacey Richter returns to a conversation with Ann Lewandowski, a nationally recognized healthcare executive last heard on EP476 discussing a pharma rebate whistleblower case, about exactly that rock-and-a-hard-place choice, and what it costs plan sponsors and patients alike. WHAT YOU'LL LEARN ✅ What a pharmaceutical rebate actually is — a post-sale concession granted a specific exemption from the anti-kickback statute (the "Safe Harbor") — and why "rebate" is really just one of roughly 50 different classifications of post-sale money flows, per Texas's insulin-pricing lawsuit ✅ Why rebates remain a black box: pharma classifies rebate amounts as trade secrets, and even the PBM-reporting laws that exist (like Minnesota's) only require aggregated, unnamed disclosure ✅ How a "direct to label" rebate agreement can block pharmacogenomic (PGx) testing: manufacturers tie rebates to a drug's existing FDA label, so a plan that adds prescribing limits based on genetic testing beyond that label forfeits the rebate entirely ✅ Why that trade-off has real clinical stakes: one study found pharmacogenomic testing can reduce emergency department visits for medication interactions by 42% — yet PGx testing and rebate-chasing are often mutually exclusive under current contracts ✅ The "rock and a hard place" this creates for plan sponsors trying to build a value-based formulary: forgo the rebate and pay list price, or keep the rebate and risk prescribing a drug that a genetic test would have flagged as ineffective or harmful for that patient ✅ Why biosimilars and other low-list-price alternatives may offer a way out: they remove the choice between chasing a rebate and prescribing based on a patient's actual biochemistry and genetics WHY THIS MATTERS Ann Lewandowski's closing point reframes the stakes beyond the clinical: plan sponsors that let a rebate keep someone on the wrong medication don't just risk an ER visit, they can also end up paying for the long-term disability that follows when an employee is on a drug that was never going to work for them in the first place. As Peter Hayes has separately pointed out, rebates directed back to a plan sponsor to lower premiums for everyone amount to a regressive tax on sicker patients who are paying list price for the medications they actually need — and with roughly half of Americans already skipping essential medications over affordability, that trade-off compounds costs for everyone down the line. MENTIONED IN THIS EPISODE EP397 with Paul Holmes: Apple Podcasts | Spotify | Other Apps EP353 with Pramod John, PhD: Apple Podcasts | Spotify | Other Apps EP465 with Chris Crawford: Apple Podcasts | Spotify | Other Apps EP426 with Nina Lathia, RPh, MSc, PhD: Apple Podcasts | Spotify | Other Apps === LINKS === 🔗 Show Notes with all mentioned links: Episode Page ✉️ Enjoy this podcast? Subscribe to the free weekly newsletter 🫙 Support the podcast with a small donation to the Tip Jar 🎤 Listen on Apple Podcasts 🎤 Listen on Spotify 📺 Subscribe to our YouTube channel === CONNECT WITH THE RHV TEAM === ✭ LinkedIn ✭ Threads ✭ Bluesky ✭ X 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? 14:29 How does pharma genomics testing affect pharma rebates?