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Rebates 101 for Long Term Care Facilities

How Facilities Can Use Rebates to Achieve Their Lowest Net Cost

While long-term care facilities’ margins are struggling due to staffing shortages and increasing administrative costs, high-performing long-term care (LTC) operators are maximizing a lesser-known tactic to bolster margins–drug manufacturer rebates. 

Rebates are a lynchpin in the marketing of new drugs and the administration of health insurance and benefit plans. While the usual recipients of rebates are pharmacy benefit managers (PBMs) and insurance companies, long-term care facilities are also eligible for rebates when they pay for drugs under Medicare Part A or managed care programs.

An Overview of Drug Manufacturer Rebates

When pharmaceutical companies market their drugs, they set a list price, similar to a retail price. Patients pay for these drugs based on their insurance benefit: typically a percentage of the list price, a copay, or the full list amount if the patient has not reached their deductible. 

Health insurance companies enlist pharmacy benefit managers (PBMs) to help negotiate drug prices, establish formularies, dictate which drugs are in network, and determine the tier the drugs fall into under the patient’s insurance benefit. For example, as a cost savings measure, PBMs will place less expensive drugs in a lower tier within a formulary, corresponding to a lower copay or coinsurance amount. More expensive specialty drugs that are in the network will be placed higher in a formulary and be more costly to the patient. Patients are incentivized to purchase lower-cost drugs in lower tiers in the formulary. 

Drug manufacturers prefer to have their drugs listed lower in the formulary with lower out-of-pocket costs to the patient as this helps acquire a higher market share of their drug. However, this is challenging due to the typical high list cost of new drugs and presents a barrier to getting their product widely used on the market. 

To get new drugs placed lower in the formulary, drug manufacturers typically offer rebates to the PBM for higher formulary placement. Over the course of a year, increased amounts of lower formulary drugs are prescribed, manufacturers sell more, and the PBM receives more reimbursement through rebates. 

The PBM shares this rebated amount with the insurance company to help keep insurance premiums low. Patients do not directly receive the benefit of the rebate in their out-of-pocket costs, but rather receive it as an indirect benefit through lower insurance premiums. 

How Long-Term Care Facilities Can Receive Drug Manufacturer Rebates

Similar to how rebates incentivize the use of lower tier drugs in a formulary, post-acute care (PAC) and long-term care facilities can also use rebates to achieve significant savings. LTC facilities that cover the cost of drugs through Medicare Part A or managed care programs are eligible to be the end recipient of rebates, which provides an opportunity to address the problem of rising drug costs. 

Due to the volume of residents cared for in a facility, monthly drug spend routinely makes up thousands of dollars. Rebates can save multi-facility operators tens of thousands each quarter, depending on the number of facilities in their organization. These valuable savings help recover dispensing and administration costs that are typically not reimbursed through a resident’s coverage.

In one quarter, a 19-facility operator received over $70,000 in rebates with SRX.

To lower the cost of medications through rebates, many pharmacy operations specialists work with facilities to restructure their formulary to identify therapeutically equivalent drugs that offer the lowest net cost.. Without the help of specialists, who have access to extensive databases of manufacturer rebates, optimizing a formulary to maximize rebates becomes an overwhelmingly complex task for the most seasoned LTC administrators.

Automating Drug Manufacturer Rebates for LTC Facilities

For LTC facilities to maximize their savings through drug manufacturer rebates, the most viable solution is choosing the right technology to automate as much of the process as possible. At SRX, we have developed the most effective way for facilities to do just this. 

By automating the identification and submission of prescribed medications that earn rebates, SRX helps our customers’ facilities save hundreds of thousands of dollars each year on their net drug costs. We achieve this by pairing proprietary technology built to address the precise needs of LTC facilities with pharmacy experts. automating the identification and submission or 

With SRX, every item on your monthly pharmacy bill is scanned and compared to our database of manufacturer rebates to identify potential savings. Once our software collects the information needed, our experts review the data before it is finally submitted. As an SRX customer, you’ll receive guaranteed rebate checks every quarter that help you achieve your lowest net drug cost.

Learn More About Our Rebates Service


Related Articles:

Long-Term Care Pharmacy Billing: 101

5 Things You Need to Know Before Switching LTC Pharmacies

[WATCH] See How SRX is Tackling the Problem of Rising Drug Costs


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SRX is a unified drug cost management solution for long-term care operators. We achieve unrivaled drug cost savings by combining our proprietary technology with expert advisors. SRX’s solutions automate drug rebates, optimize pharmacy management practices, increase managed care exclusion reimbursements, and provide cost-effective employee prescription benefits. SRX guarantees quarterly rebates are paid on time, every time, with no out-of-pocket cost.


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