Could drugmakers have charged a billion dollars a pill before?
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No. This is rebates. Prior to this, individual PBMs and Insurers negotiated the rebates themselves, AND also determined where the profits to the rebates went.
The best rebates are based on the volume of the drug sold by the entity, so large PBMs are able to get larger rebates than smaller insurers. By nationalizing the pool and having a single entity negotiate the rebate directly with the manufacturer should lead to the best price overall.
Most companies had to negotiate separately their Medicare rebates from their Commercial programs [company coverage, COBRA, ACA], so their rates are not as good as the national rate.
Companies also determine where the money from the rebates go, some put the money back into the member’s program, which tends to reduce premiums in future years. This is the way the Federal rebate program is set up. Other companies have their rebate operations set up so the rebate income is purely profit, and goes to the shareholders of the company.
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