Balancing the Benefits of Drug Rebates vs. Low Wholesale Drug Prices

Balancing the benefits of drug rebates vs. low wholesale drug prices can be a challenge for independent pharmacies. Since there are no clearly defined best practices to follow, each pharmacy must create its own.

To help you formulate your pharmacy’s practices, I will lay out the pros, cons, and question marks of each.

Drug Rebates

Drug rebates add up, the savings are important, and it’s a win when you find out that you paid below list price for a drug. So, what could be wrong?

Unlike simple consumer rebates, where the buyer knows she will save a certain amount of money by making a particular purchase, drug rebates are complicated. Usually, two things have to happen for a pharmacy to get a rebate.

  1. The supplier has to meet a minimum purchase level set by the manufacturer to qualify for a rebate they can then pass on to pharmacies.
  2. Likewise, the pharmacy has to purchase enough from that supplier to qualify for rebates.

And the system is blind at both stages, so the pharmacy doesn’t know how much of a rebate to expect, which makes planning for inventory expenditures difficult.

The prevailing view is that the system is designed to build loyalty. But is that really loyalty or is it actually financial pressure due to the pharmacy’s fear that they could be miss out on a rebate? Obviously, there is a difference.

Low Wholesale Drug Prices

When a pharmacy can buy a drug from one supplier at a lower retail price than they would have to pay ordinarily, the result is a win, just like getting a fat rebate.

One of the big benefits of paying a lower price is that you realize the savings immediately, not at some as yet undetermined time down the road.

To be fair, purchasing drugs that cost less also comes with uncertainties, since you don’t know what the prices are going to be until you are ready to buy. And with suppliers other than your primary, minimum purchase requirements can come into play.

The Right Balance

Obviously, neither system is perfect. Here’s how a number of TRxADE members have found the right balance between drug rebates and low wholesale drug costs:

  1. Make sure you buy enough from your primary supplier to earn your rebates.
  2. Compare prices every time you make a purchase. You never know where you’ll find big savings.
  3. When you see a killer low price on an item you purchase on a fairly regular basis, buy a lot of it.
  4. Figure out what percentage your rebates are usually saving you on a drug. When you see an offer with savings higher than that percentage, go for it.

Number 3 is just plain smart. Many pharmacies are so locked into a system of purchasing only when they absolutely need something that they don’t have the flexibility to save a lot. They end up letting opportunities go by. See if your pharmacy can loosen up some funds to pre-purchase as long as the savings are good. You stand to save a lot of money.

Number 4 is critical. You have to know how much you are saving on average with rebates. Some TRxADE members purchase when the lower price is at least 6% less than they’d have to pay their primary, but for others it’s as high as 12% or more. You have to make that decision based on your financial realities.

Competition is King

Manufacturers and suppliers offer rebates because they know you have other places to turn to meet your needs. Monopolies don’t offer rebates.

On the TRxADE marketplace, suppliers compete for your business. You can see offers from multiple suppliers in one place. By balancing your savings from rebates and from low wholesale drug prices on TRxADE, you can save your pharmacy a lot of money.

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