Big Rebates Make High Drug Prices Look Like Savings. Here’s The Fix

NEW YORK, NEW YORK - JULY 23: Prescription drugs are displayed at NYC Discount Pharmacy in Manhattan on July 23, 2024, in New York City. In the U.S. drug market, higher list prices can paradoxically look like savings. (Photo by Spencer Platt/Getty Images) Getty Images

America’s largest companies are among the toughest negotiators in global commerce. They pressure suppliers, scour contracts for waste and squeeze costs wherever they can. Yet in prescription drugs, these same companies participate in a system that makes them — along with brokers, pharmacy benefit managers and drugmakers — effectively happier when list prices go up.

If a Fortune 100 CFO applied the same logic to any other part of the business, they’d be fired. That’s the strange economics of the rebate system that dominate