Category Archives: rebates

Should the Government Regulate Prescription Prices, Part 1

Consider these recent headlines:

The cost of Biogen’s new drug: $750,000 per patient

Gilead’s New Hepatitis C Drug Approved by FDA, Priced at $74,760

Hospitals Furious at Cancer-Drug Price Hikes

Got Insurance? You Still May Pay A Steep Price For Prescriptions

There is quite a bit of unhappiness about drug prices these days.  One of the proposed solutions to the problem of high drug prices is to have the federal government negotiate or regulate prices.  In the next few blog posts, I’ll examine various arguments that support government regulation of prescription drug prices and some that oppose it.  But first, in this post, I’ll provide some basic background on the prescription drug market that I think is useful in understanding the arguments for and against government regulation of prescription prices. Continue reading

What are DIRs?

Prescription drug pricing and reimbursement are complicated and confusing as it is.  DIRs have only made them more so.  And much more painful for community pharmacies.

What are DIRs?

DIR stands for Direct and Indirect Remuneration.  The term was initially used by the Centers for Medicare and Medicaid Services (CMS) to refer to all price concessions which PBMs and plan sponsors (insurance companies, HMOs, chains and PBMs offering Medicare Part D plans) receive for Part D prescription drugs that were not included in the point of sale transaction (i.e., when the drug was dispensed to the patient and the charge sent to the plan sponsor or PBM).  CMS reconciles payments to plan sponsors at the end of each year and one of the reconciliation involves reducing plan reimbursements by the amount of the DIRs received by plan sponsors.

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Discounts, rebates and kickbacks

One of the purposes of this blog is to educate readers about basic issues in pharmacy business.  This post will discuss the differences between discounts, rebates, and kickbacks.  Warning – I am not a lawyer and this is not a legal opinion.  It’s a non-lawyer’s attempt to understand and explain some basic pharmacy business concepts.

A headline on the Wall Street Journal Health Blog from earlier this year announced that “AstraZeneca Pays $7.9M to Settle Kickback Charges Paid to a PBM”   The federal government alleged that AstraZeneca made illegal rebate payments to Medco in exchange for preferred formulary position for Nexium (a very popular drug prescribed for ulcers).

Pharmaceutical companies commonly provide rebates to PBMs and specialty pharmacies to increase use of their products, so why was the rebate in this situation a kickback? Continue reading