How the Rebate Wall Limits Competition, Access

As part of our goal to improve the treatment experience for people living with serious, chronic diseases, Lilly dedicates significant resources to bring innovative medicines to patients that help make a difference in their lives. However, we are deeply concerned about practices that limit patient access to these innovative medicines.  

Some of these practices, like step therapy and fail-first approaches, are well known. One lesser known but extremely problematic practice is known as the rebate wall. Rebate walls are a contracting practice some manufacturers use to prevent competition, block new therapies from entering the market, and keep prices for existing therapies high.

Rebate walls block competition by coupling volume-based discounts across multiple indications with retaliatory measures, such as the clawback of rebates by a market leader.  This practice is especially problematic in therapeutic areas such as the autoimmune market where established medicines control considerable market share. 

Contracts that include bundling can be extremely effective at blocking competition and potentially limiting access to the most effective medicine. In fact, the Department of Health and Human Services (HHS) has acknowledged this problem, most recently in the proposed rule that would reform the Anti-Kickback Statute rules for rebates.

In order to gain formulary access in markets where rebate walls exist, competitors must offer new therapies at discounts significant enough to offset the discounts and rebates a payer loses from the market leader by adding a new product to formulary.  However, the substantial volume that market leaders enjoy require competitors to offer price concessions that may not be financially viable over the long-term.

 Contracts that erect rebate walls are also typically conditioned on step therapy or fail first policies for new competitor drugs. In order for an insurer or PBM to accept a new competitor product onto the formulary, they must place the new product on a high tier and may require patients to first fail multiple therapies before receiving coverage for the competitor product. In the most egregious cases, patients must fail multiple medications with the same mechanism of action before they receive coverage for a new therapy.

Ultimately, patients bear the costs of the rebate wall, both in financial terms as well as in terms of access.  For example, when rebate walls drive formulary and step therapy decisions, patients are forced to try and fail medicines that may be less clinically appropriate or more expensive first.  Delays caused by step therapy and fail first procedures can exacerbate health conditions, jeopardize medication adherence, and subject patients to significant side effects as they try and fail multiple drugs before receiving access to the physician-prescribed therapy. 

To learn more about the rebate wall and how the rebate wall negatively impacts patients and doctors, plus potential solutions to prevent this potentially anticompetitive practice, we encourage you to read this article from David Balto, an antitrust lawyer and healthcare industry competition expert.