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    Most PBM/client contracts contain core language in which PBMs define the term “rebates” and agree to pass through all or most rebates to their clients.Here are three examples: This language may appear benign, but it is anything but.Misbehaviour had to be punished, honour upheld, peace between neighbours kept, and people's lives and property protected.Not reporting a felony was a crime in itself: The great criminal, Weren, who was butler.Often, the Part D sponsor or its pharmacy benefits manager (PBM) receives additional compensation after the point-of-sale that serves to change the final cost of the drug for the payer, or the price paid to the pharmacy for the drug.Examples of such compensation include rebates provided by manufacturers and concessions paid by pharmacies.Under Medicare Part D, this post point-of-sale compensation is called Direct and Indirect Remuneration (DIR) and is factored into CMS’s calculation of final Medicare payments to Part D plans.

    As a result, CMS has observed a growing disparity between gross Part D drug costs, calculated based on costs of drugs at the point-of-sale, and net Part D drug costs, which account for all DIR.

    This trend has significant implications for Medicare Part D: Medicare Part D Payment Medicare’s payments to Part D sponsors are largely determined through an annual bidding process.

    A plan’s bid reflects its estimate of the revenue needed to provide beneficiaries with the Medicare prescription drug benefit.

    If a PBM enters into contracts with drug manufacturers and chooses to give rebates another name — like administrative fees or health management fees or grants — the PBM will arguably eliminate its obligation to pass through the financial benefits to its clients.

    Moreover, a PBM can deprive its clients of rebates by ensuring the rebates are paid on a basis that is not attributable to the clients’ drug purchases.

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