'Wacky' rebate system to blame for high patient drug prices, FDA chief says

The "wacky" rebate system is one of the main reasons drug prices remain high in the U.S. for patients, FDA Commissioner Scott Gottlieb, MD, told CNBC.

Rebates are the discounts drugmakers pay to pharmacy benefit managers in exchange for a spot on their formularies, or lists of approved drugs. PBMs then pass part of these rebates to insurers and employers who use the rebates to lower premiums for employees across the board, instead of giving the rebates to the patients who are paying for the drugs.

"[Patients are] spending money to subsidize everyone else's premium," told CNBC. "The sick people are helping to subsidize the healthy people. That's not how insurance is supposed to work. So we've got a wacky system where the discounts aren't flowing to the people."

Rebates have long been criticized by pharmaceutical companies, who say PBMs ask for huge discounts and keep them to boost their profits instead of sharing the savings with patients. The PBMs in turn  blame drugmakers, who they say set the prices of their drugs.

The comments come as the Senate Finance Committee prepares to question seven pharma executives Feb. 26.

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