Prescription Drug Spending Rising at an Unaffordable Rate Despite Drug Rebates

Focus Area:
Sustainable Health Care Costs
Peterson-Milbank Program for Sustainable Health Care Costs Health Care Affordability

Even after accounting for rebates, prescription drug spending has continued to grow at an unaffordable rate, according to a new analysis of three states with health care cost growth targets—Connecticut, Rhode Island, and Oregon—published in Health Affairs Forefront. As part of their efforts to implement health care cost growth targets, these states now require payers to provide aggregate data on pharmaceutical rebates they receive. 

In the article, Jessica Mar and January Angeles of Bailit Health explain that pharmaceutical manufacturers often tout that drug rebates — or discounts of usually undisclosed amounts given to health insurers and pharmacy benefit managers — significantly lower prescription drug prices and price growth.

Using aggregate spending data, the three states calculated actual spending on prescription drugs between 2018 and 2021. While rebates reduced drug spending growth, spending still increased by between 3.2% and 6.1%. This trend exceeded growth in Connecticut and Rhode Island’s median household income. Oregon’s trend post-rebate was slightly lower than its household income growth.

These states receive technical assistance with their health care cost growth programs through the PetersonMilbank Program for Sustainable Health Care Costs.