This year, the prescription drug landscape is shifting from a focus on rebates toward a more transparent view of net costs. For years, manufacturer rebates paid to pharmacy benefit managers (PBMs) have been key to drug pricing. These rebates were meant to lower overall spend but they sometimes hid the real costs paid by payers and patients. Market and policy changes are now having an impact on how drug pricing is being handled.
The list price of a drug is different from its net price. According to the Pharmaceutical Care Management Association, list price is the manufacturers’ price to wholesalers or direct purchasers and net prices are revenue per unit of the product after all concessions (rebates, coupon cards, and other discounts) are taken into account.
There’s now a growing trend toward net cost transparency.
Why Net Cost Pricing Now?
In the past, drug companies set high list prices (also known as sticker prices). The companies paid rebates back to PBMs and payers after the fact. The premise was that rebates would lower overall costs. But patients often paid their share—through copays or coinsurance—based on the high list price and not the rebated price. Even though there were rebates, patients and employers didn’t always see the savings.
For example, a drug could be listed at $8000, and the rebate paid later was $700. But the patient cost sharing was based on $8000 and not the lower cost.
Many say that rebates can raise out-of-pocket (OOP) spending for patients and skew prescribing behavior towards higher-priced medications.
Now people are seeing that the list price doesn’t equal the real cost of the drug. Rebates can make pricing look better on paper while hiding the true cost. And a drug with a big rebate isn’t always less expensive than one with a smaller rebate. Buyers are now asking what the actual cost is, including what it costs both the patient and the plan.
That’s where net cost comes in. Net cost is the list price minus rebates, discounts, and other concessions. For example, Drug A could have a high price and a big rebate yet still be expensive. On the other hand, Drug B could have a lower price and a small rebate, making it less expensive overall.
There are some shifts driving this change. List prices keep rising even when net prices are flat or falling. In 2025, for example, the list prices for brand-name drugs increased by 3.5% on average while net prices went down.
In addition, employers and plans are under budget pressure, and regulators and consultants are pushing for more transparency in drug pricing. Biosimilars and other alternatives are giving buyers more choices when it comes to purchasing time.
In a nutshell, rebates don’t always mean savings, but net cost does.
What Does the Future Hold?
In the future, decisions about drugs will be made on what drugs truly cost and not on how big the rebate appears. Rebates will matter less for some medications, especially those with little
competition. In turn, formularies will focus more on net cost, clinical value, utilization controls, and patient impact.
While rebates continue to be valuable, the market in general is trying to focus on real costs.
Interested in learning more about rebates? Contact [email protected].
