Drug Rebates Do Not Increase Costs to Consumers

8 Pages Posted: 8 Jun 2018

See all articles by Anthony T. Lo Sasso

Anthony T. Lo Sasso

University of Illinois at Chicago - School of Public Health

Ike Brannon

The Jack Kemp Foundation

Date Written: May 29, 2018

Abstract

Ascribing a portion of the blame for high drug prices on the system of manufacturer rebates misconstrues the nature of the market for prescription drugs. We submit that these rebates are the product of a healthy negotiating process between pharmacy benefit managers and manufacturers, one that serves to inject a modicum of market discipline into a market where it would be otherwise absent. We see no reason that abolishing such a system would result in lower drug prices, and suggest that the most likely outcome from such a prohibition would be another, more convoluted system that imprecisely replicated the rebate system.

Keywords: Drug Prices, Health Markets, Rebates, Price Discrimination

JEL Classification: I11, I18

Suggested Citation

Lo Sasso, Anthony T. and Brannon, Ike, Drug Rebates Do Not Increase Costs to Consumers (May 29, 2018). Available at SSRN: https://ssrn.com/abstract=3186918 or http://dx.doi.org/10.2139/ssrn.3186918

Anthony T. Lo Sasso

University of Illinois at Chicago - School of Public Health ( email )

1603 West Taylor Street
Chicago, IL 60612
United States

Ike Brannon (Contact Author)

The Jack Kemp Foundation ( email )

1200 New Hampshire Avenue N.W.
suite 800
Washington, DC 20036
United States

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