How PBM rebates work
Manufacturers pay rebates to PBMs when their drugs meet the terms of a manufacturer agreement. The amount can depend on the drug, its formulary position, utilization, and the specific agreements in force.
The problem for employers is not that rebates exist. It is that the money can be difficult to follow.
A PBM may report a single rebate guarantee without showing the manufacturer payments underneath it. Other fees or payments may sit outside the number labelled as a rebate. And a plan may never learn how much was actually received, when it arrived, or how much of it reached the plan. A rebate percentage on a report is difficult to audit for exactly that reason.
Kanurra credits the rebates it receives back to the plan, and shows the amount in the ledger as it arrives.
Manufacturer rebates
Which manufacturers are paying rebates, for which drugs, and under what agreements?
The answer should be tied to the drugs actually being dispensed to your members, rather than to a generic rebate guarantee calculated across a book of business you are not part of.
What this tells you
Can you name the drugs in your own plan that generated rebates?
Rebate dollars received
A projected rebate is not the same thing as a rebate that arrived. Look at what was paid, when it arrived, and how the amount was calculated.
This is the difference between a forecast and a record, and only one of them can be reconciled against anything.
What this tells you
Do you know what was received, as distinct from what was expected?
Rebate pass-through
Ask how much of the rebate reaches the plan, and insist on a number rather than a word.
If the PBM receives $100, the employer should be able to determine what happened to that $100: how much was credited, how much was deducted, and on what basis.
What this tells you
Does your pass-through arrangement have a figure behind it?
Administrative fees and other payments
Rebates are not the only money moving through a pharmacy benefit, and rebate reporting will not show you the rest of it.
Look for administrative fees, data fees, service fees, and other payments that sit outside the rebate calculation entirely.
What this tells you
Have you accounted for the money that moves outside the rebate number?
Formulary decisions
A formulary determines which drugs receive preferred placement, and preferred placement is often what a rebate is paid for.
Employers should understand whether rebate arrangements influence formulary decisions, and what that means for both plan cost and members.
What this tells you
Do you know who controls your formulary and what shapes their decisions?
Rebate reporting
A quarterly summary can tell you that rebates were generated. A detailed ledger lets you check the number.
Find out whether your PBM provides drug-level or claim-level detail, and whether the underlying data can be exported for review outside the PBM's own dashboard.
What this tells you
Could you reconcile a rebate to a claim without asking the PBM to do it for you?
A rebate and a rebate guarantee are not the same thing
A rebate guarantee is a promise about what the plan is expected to receive. An actual rebate is money paid under a manufacturer agreement. Those are different objects, and only one of them has already happened.
A PBM might guarantee an average rebate amount across its whole book of business while the employer still has limited visibility into the individual manufacturer payments behind that average.
Whatever the arrangement, it should be possible to answer these five questions about any rebate:
- 01What drug generated the rebate?
- 02Which manufacturer paid it?
- 03How much was received, and when?
- 04How much was credited to the plan?
- 05Was anything retained or deducted first?
What rebate reporting should let you do
If you cannot trace the rebate, you cannot independently verify it.
What you usually get
Rebate guarantees
- A contracted amount or average guarantee
- Rebate performance reported periodically
- A number that is hard to reconcile to individual claims
- Limited visibility into manufacturer payments
What lets you check it
Rebate auditability
- Rebates shown as they are received
- Amounts credited directly to the plan
- A clear record of the rebate against the benefit
- No rebate revenue retained by the PBM
- Underlying data reviewable against claims and contracts
Questions to ask your PBM
If your PBM cannot answer these with underlying documentation, the rebate number on your report is difficult to verify independently.
- 01How much did you actually receive in manufacturer rebates for our plan?
- 02Which drugs and manufacturers generated those rebates?
- 03How much of the rebate was credited back to our plan?
- 04Are any rebate-related fees or payments deducted before the plan receives the money?
- 05When are rebates credited to the plan?
- 06Can we review the underlying rebate data and reconcile it against our claims?
- 07Do formulary decisions take manufacturer rebates into account?
How Kanurra handles PBM rebates
Kanurra gives employers visibility into the money moving through their pharmacy benefit, rebates included.
- 100% of rebates received are credited back to the plan
- Kanurra retains no rebate revenue
- Rebates are shown in the plan's ledger as they arrive
- Claims can be reviewed at the line-item level
- There is no spread or markup on claims
- One flat per-employee-per-month administrative fee
What varies and what does not
The rebate amount depends on the manufacturer agreements and the drugs in your plan. The policy does not: Kanurra keeps none of what it receives.
Rebates are one part of the economics. For how the pharmacy payment, the plan charge, and the fees fit around them, see PBM pricing, or work through the PBM audit checklist to reconcile rebates against your own contract.
PBM rebates FAQ
What are PBM rebates?
PBM rebates are payments pharmaceutical manufacturers make to pharmacy benefit managers under agreements that can be tied to specific drugs, formulary placement, utilization, or other terms. Depending on the arrangement, the rebate may reduce the plan's net pharmacy cost.
Who receives PBM rebates?
The PBM typically receives rebates from manufacturers under its own agreements. How those dollars are then shared with or credited to the health plan depends entirely on the PBM contract.
Do employers get 100% of PBM rebates?
Not necessarily. It depends on the employer's contract. Some arrangements guarantee a percentage or a fixed amount, while others allow the PBM to retain some or all of the rebate revenue.
Does Kanurra keep any PBM rebates?
No. 100% of every rebate Kanurra receives is credited back to the plan, and Kanurra keeps none of it as revenue.
How can I tell if my PBM is keeping rebates?
Review the contract's rebate provisions, then compare the contracted terms against the amounts actually credited to the plan. Ask for the underlying rebate data and documentation showing what was received and what was passed through.
Are rebates always good for employers?
Not by themselves. A large rebate can coexist with high drug prices, spread pricing, or additional fees. Rebates should be evaluated alongside claims pricing and the total net cost of the benefit, not in isolation.
What is a rebate pass-through?
Rebate pass-through means the rebate the PBM receives is credited to the plan according to the contract. The questions that matter are how much is actually passed through and whether the employer can verify it.
How does Kanurra make money if it does not keep rebates?
Kanurra charges one flat per-employee-per-month administrative fee, disclosed in the contract. It does not rely on spread, rebate retention, or additional program and data fees.
Can Kanurra audit my current PBM rebates?
Yes. Kanurra's audit reviews an existing pharmacy arrangement, including pricing, rebates, fees, and other pharmacy-benefit costs, before an employer decides whether to change anything.
See where your rebate dollars go
Do not settle for a rebate guarantee you cannot verify. Send us your claims and we will show what your PBM receives, what your plan gets back, and what happens in between.
Audit my claims