Pragya Kakani

Harvard University

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Institutional Affiliation: Harvard University

NBER Working Papers and Publications

March 2020Rebates in the Pharmaceutical Industry: Evidence from Medicines Sold in Retail Pharmacies in the U.S.
with Michael Chernew, Amitabh Chandra: w26846
Rising list prices are often used to illustrate the burden of prescription drug spending, but payers routinely negotiate rebates from manufacturers that generate differences between list and net prices. List prices are easily available and affect patient cost-sharing, but net prices are confidential and affect innovation incentives. We use novel data on medicines sold in a retail setting to quantify rebate growth, the sensitivity of pharmaceutical price indices to list versus net prices, and contribution of net price growth to revenue growth. From 2012 to 2017, we find average rebates increased from 32% to 48%, owing entirely to growth in rebate-levels over a product lifetime rather than shifts towards high rebate products. Annual inflation of list prices was 12% while that of net prices w...

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