Adam Fein (Drug Channels well-known author) published his predictions for a world without rebates this morning. The summary is below:
1) PBMs’ services will remain crucial to the proper functioning of the U.S. drug channel.
2) Pharmacy benefits will operate more like traditional insurance. Plans and PBMs will seek drugs with the lowest net costs, regardless of list price.
3) PBMs will force manufacturers of therapeutically comparable products to bid for coverage in formulary auctions.
4) Rebate walls will crumble, leading to aggressive indication-based price competition.
5) Biosimilars will be adopted more quickly—and have deeper price cuts.
6) Manufacturers will reduce current list prices. Drug prices will grow slowly.
https://www.drugchannels.net/2019/03/a-world-without-rebates-predictions-for.html#more
Based on his comments, the PBM system will not disappear overnight (reassuring for CVS). Also, we think small, independent pharmacies will see their profits negatively impacted by the disappearance of rebates, as they relied on them to generate higher profits (see this pharmacy professor’s calculation on his website below). This could be a positive for CVS who could take market share in such a scenario.
https://wp.vcu.edu/nvcarroll/2015/07/13/how-do-retail-pharmacies-make-money/
[tag CVS]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
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