Why should I care about duplicate discounts?

Why should I care about duplicate discounts?

It’s a good question… and we’ve got answers. Read on to learn more about the revenue leakage you might not have anticipated.

First, what are duplicate discounts?

Drug manufacturers typically participate in many drug discount programs to provide access to needed therapies for vulnerable patient populations. Some examples include:

  • 340B Drug Pricing Program
  • Medicaid Drug Rebate Program
  • Commercial and Medicare Part D rebates

Where these programs overlap, usually only one is entitled to the discount. But due to lack of clear communication, multiple parties may still request the discount from the manufacturer. Lacking the data needed to vet these requests, manufacturers have no choice but to pay.

When this happens, manufacturers can pay duplicate and sometimes even triplicate discounts on a single dispense. They may even pay out more in discounts than the total cost of the drug.

The high cost of duplicate discounts in 340B
Total discounts under 340B in 2019
Total rebates under Medicaid in 2017
Amount of Medicaid claims that may overlap with 340B
Estimated duplicate discounts between 340B and Medicaid
Duplicate discounts cost manufacturers

As drug discount programs have grown rapidly over the past decade, noncompliant discounts have gone from a minor concern to a major issue.

For larger drug manufacturers, noncompliant discounts are a significant source of revenue loss. Some manufacturer estimates place the cost of duplicate discounts for their own companies at hundreds of millions of dollars of lost revenue per year.

For early growth companies, revenue loss caused by noncompliant discounts can even be a threat to the company’s long-term survival. Bringing a new drug to market is a lengthy and costly process, and unexpected losses may not be within the emerging company’s margins to absorb.

Based on our analysis of more than half a million claims that have been reviewed by covered entities using the Kalderos Review tool, we estimate that 6% of requested Medicaid rebates are duplicate discounts with other government-sponsored drug discount programs (primarily 340B).

This is a conservative estimate. Because of lack of data, some duplicate discounts are extremely tough to detect. The true percentage is likely even higher.

Duplicate discounts threaten the drug discount programs that patients rely on

While manufacturers bear the financial costs of duplicate discounts, noncompliance is also bad for the drug discount programs themselves, and by extent, the patients they serve. If major manufacturers become reluctant to participate in drug discount programs because of unpredictable losses, these programs will no longer be sustainable and may no longer be available for vulnerable patients.

Duplicate discounts are a harmful inefficiency in the healthcare system

American healthcare costs are startlingly high compared to those in the rest of the world, and the cost of prescription drugs is no exception. American patients pay more for prescription drugs than any other patients in the world.

These high costs are driven in part by inefficiencies like noncompliant discounts. When manufacturers lose revenues toward discounts they don’t actually owe, it affects the costs of drugs and makes the healthcare system more costly for everyone.

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Article published
December 17, 2020