Untapped Potential: Medical Drug Rebate Strategies for Payers
Posted on June 5, 2025
Maximizing Value through Medical Drug Rebate Strategies
PSG’s 2025 Trends in Specialty Drug Benefits Report, released in late April, revealed several unexpected and impactful insights for payers and other healthcare stakeholders. While the supporting webinar covered a broad range of topics, one issue warranted additional discussion: medical drug rebates. Despite their potential to help offset costs, medical rebates remain underutilized, with only 35% of employers and 76% of health plans currently capturing these rebates. Additionally, many of those who do receive medical rebates indicate that maximization of these rebates is a priority for their organization. These findings demonstrate the need for a two-phase approach beginning with foundation-building and moving to more advanced strategy optimization.
The Role of Rebates
As the pharmacy benefits landscape continues to evolve, rebates remain a pivotal component of comprehensive cost management strategies for both employers and health plans. While pharmacy benefit rebates have historically received the lion’s share of attention, our research indicates that medical benefit rebates represent an increasingly important but underutilized cost management lever. The distinction between pharmacy and medical rebates continues to blur as specialty drugs appear in both benefit channels, creating new opportunities for strategic alignment and optimization. Yet we have seen that many organizations haven’t prioritized the foundational infrastructure necessary to capture medical rebates, leaving substantial value on the table before optimization strategies can even be considered.
The Foundation Gap and Addressing Prioritization Challenges
Our research reveals a striking disparity in receipt of medical drug rebates: while 76% of health plans report receiving medical rebates, only 35% of employers do so, and larger employers (49%) are more than three times as likely to receive medical rebates compared to their smaller counterparts (15%). In some cases, available rebate dollars may simply remain unclaimed, representing a missed opportunity for savings.
Furthermore, the growth of rebates has continued, with just over half of payers that receive medical rebates reporting increases in medical rebate dollars over the past 1-2 years.
Additionally, among organizations that receive medical rebates, 61% of health plans and 38% of employers prioritize medical rebate maximization to a moderate or great extent. These prioritization statistics reveal that payers may vary with respect to their current medical rebate strategy status — some may not yet have developed baseline strategies to capture these rebates effectively in the first place, so maximization of rebates is not a priority.
Taken together, these findings suggest that to have successful medical rebate programs, payers must first prioritize establishing a reliable data collection infrastructure and rebate submission strategy, then build strategic pillars to maximize the value of these programs.
Strategic Approaches to Medical Rebate Development and Optimization
For organizations looking to establish or enhance their medical rebate programs, the following strategies can help get you started down the right path:
Rebate Submission Strategies
Organizations must first determine the optimal path to receive and contract for medical rebates. Direct manufacturer negotiations may yield higher rebate rates but can increase operational burden through contract administration, data submission requirements, and ongoing relationship management. Current vendor relationships (such as through the health plan, TPA, or PBM) may also provide access to a medical rebate program. Alternatively, contracting directly with a rebate aggregator is another approach that can provide competitive rates, making them particularly attractive for organizations currently receiving no medical rebates, where some capture is definitively better than none. It is important that the rebate submission partner can offer the level of flexibility in data requirements and utilization management programs required by the plan.
Medical and Pharmacy Data Integration
Comprehensive data integration across both medical and pharmacy benefits provides the foundation for enhanced insights and identification of therapeutic classes where lowering net costs through available rebate strategies could meaningfully impact trend management. Having access to robust data integration capabilities, like Artemetrx, can help payers pinpoint specific opportunities within their unique population, detect utilization shifts between benefit channels, and serve as the catalyst for targeted formulary management strategies that optimize both clinical outcomes and financial performance.
Market Basket Utilization Management
Strategic utilization management approaches can drive enhanced medical rebates by preferring certain products within therapeutic classes via enhanced prior authorization requirements. This market basket approach allows payers to influence prescribing patterns toward preferred products, lowering overall net costs while maintaining clinical appropriateness and member access to necessary medications.
Third-Party Audit and Optimization
Engaging independent, expert pharmacy consultants to audit rebate adjudication and guarantee execution ensures maximum value capture. Consultants bring specialized knowledge of both clinical considerations and contracting nuances to uncover opportunities that internal teams might miss, particularly for organizations just beginning to develop their medical rebate strategy.
The Optimization Imperative: Building from Foundation to Excellence
The gaps in medical rebate collection and optimization represent a critical opportunity for payers to enhance their benefit strategies and achieve meaningful cost savings without compromising care quality. For payers currently receiving no medical rebates, the first step involves prioritizing basic collection infrastructure rather than advanced optimization techniques. Once a rebate submission strategy is in place, organizations can focus on new opportunities to lower net cost through medical formulary and utilization management. As specialty drug spending remains a top priority among payers, leveraging every available cost management tool becomes increasingly vital. With our deep expertise in specialty drug management across both medical and pharmacy benefits, PSG stands ready to help payers navigate the complexities of medical rebate capture and optimization, from establishing initial collection capabilities to unlocking the full potential of advanced rebate management strategies.
For more information on specialty drug benefits trends, download our 2025 Trends in Specialty Drug Benefits Report.
