[jimt1234]

I worked for a PBM back in the 90s. The company, and the whole industry, was/is shady AF.

I remember once when I was volun-told to work for new program that handled "rebates". They needed a nerd to support the servers/databases. There was a presentation explaining the program and how it worked. At the conclusion, I asked, "So, this is a kick-back?", and the room went silent. "No, it's not a kick-back. It's a rebate." Hmmm. "Well, it sounds like a kick-back. What's the difference?" We went back-and-forth for a minute or two. Then, finally, some suit spoke up and said "Kick-backs are illegal. Rebates are not." And that was that.

So, I applaud Mark Cuban for his efforts here. I hope this succeeds.

[PragmaticPulp]

I deplore the medication rebate racket as much as anyone, but it's not a kick-back.

A kick-back would go to the doctor or pharmacist for pushing the customer toward a medication. The problem in this scenario is the monetary incentive to mislead the customer.

With medication rebates, the customer is getting the drug one way or another. The rebate just discounts the effective price and sends the discount to the customer. The only party not aligned is the insurance companies (who, IMO, probably hate this system more than anyone)

[derefr]

> A kick-back would go to the doctor or pharmacist for pushing the customer toward a medication.

Why is it not a kick-back if the customer’s insurance company is the one being paid to push the customer toward a medication, via differential coverage/co-pays/etc?

[gruez]

AFAIK the illegal part of the kickback is when you're abusing your position to enrich yourself (the agent), when you have a duty to act in the best interests of the principal. You buying a widget, and then the manufacturer sending you a rebate (aka. a "kickback") isn't illegal because there's no conflict of interest. However, if you're in charge of buying widgets for a company, and the manufacturer is paying the rebate directly to you instead of the company[1], then it is illegal.

In the case of the drugs, it's fine because the person ultimately paying for the drugs is the insurance company, which also happens to be the entity receiving the "kickback".

[1] https://www.justice.gov/usao-ndca/pr/former-netflix-executiv...

[refurb]

If I got my grocery store and they say “buy 5 bottles of shampoo and mail your receipt for a $5 rebate” am I getting a “kick back”?

PBM rebates are not illegal. They aren’t transparent to patients (which is a problem) but they aren’t illegal.

[mattnewton]

I think this metaphor is missing a step - it would be like if you somehow bought "shampoo insurance," and under this policy the insurance company paid for your shampoo needs in exchange for a fixed monthly fee. And since people are buying under their shampoo insurance policies, then one shampoo company starts paying people directly to effectively direct the insurance companies dollars towards their brand. Isn't that a bit more like what is happening? You are being paid to influence the direction of your own policy.

I don't think this is as much as a problem with normal kickbacks since the party being directly "harmed" here is an insurance company not getting as good a deal as they could and their whole job is to set prices for policies to account for that. Of course, this could lead to a bigger problem, because insurance companies could account for programs like this in rates, and now you have an arms race where your policy only makes cost sense if you are getting these incentive payments.

[gruez]

>Of course, this could lead to a bigger problem, because insurance companies could account for programs like this in rates, and now you have an arms race where your policy only makes cost sense if you are getting these incentive payments.

Aren't the two in equilibrium though? The price of the kickback is priced into the MSRP of the drug, and the kickback you get is priced into the cost of the policy. If the kickback disappears, both would cancel out.

[mattnewton]

They are in equilibrium for people buying the product with the kickback. Other brands now are artificially more "expensive" and have to issue kickbacks to remain attractive, or the people who aren't participating just have worse rates because they might accept kickbacks in the future even if they aren't using drugs that offer them today.

My understanding is that your policy funds are effectively "mixed" with other people covered by your insurance company.

So, I think it could very easily be a net transfer of money from people who aren't using that drug category but have insurance policies used by people who do use that drug, to the drug company at the end of the day.

[Dylan16807]

If the end customer gets the money then it's not a kickback.

If a middleman gets the money it's probably a kickback.

[refurb]

That’s not how kickbacks work.

A doctor could easily tell a patient “if you go to this hospital for surgery, I’ll give you $100”

That’s still a kickback.

[Dylan16807]

Is the doctor doing that for fun?

If the doctor is getting any of the money, then that part is the kickback.

If the doctor really gets nothing extra, and the hospital gets nothing extra, then that's not a kickback, it's just weird.

[refurb]

Huh? If a company gives you a $5 rebate for buying 5 bottles of shampoo, then it gets extra sales.

So if a $5 grocery rebate a kick-back?

[Dylan16807]

Increased sales, when paid by the same entity that gets the rebate, are not a kickback.

If a doctor took money to steer you to a specific hospital, that would be a kickback.

If a hospital gives you a rebate and you're paying, that's not a kickback. But if a hospital gives you a rebate and your insurance is paying based on the non-rebated price, that's probably a kickback.

[lotsofpulp]

PBMs are just departments in managed care organizations (MCOs), aka health insurance companies nowadays. MCO profit margins are 5% or less, so if you buy coverage from an MCO, it makes no difference to you what the PBM division does. Any money made by PBM divisions just goes to offset expenses in the insurance division. If the PBM makes less money, then insurance premiums have to go up.

The chain of money goes from managed care/insurance buyer (individual/employer/government) to MCO to healthcare provider, whether it be a pharmacy, a drug manufacturer, a hospital, or a doctor. The fact that the middle has a tiny profit margin means there is not much juice to squeeze there.