Understanding the Drug Patent Lifecycle: Protect Your Plan from Hidden Costs

From the moment a drug is approved, its price is set by the manufacturer, heavily influenced by FDA regulations that grant exclusivity periods and delay the launch of generics. During this exclusivity window, manufacturers aggressively work to secure their market dominance by offering coupons directly to consumers. This tactic allows patients to bypass traditional PBM formularies, co-pay structures, and even employer-based deductibles, enticing them to choose the brand-name drug. While this strategy helps manufacturers gain market share, it can undermine a plan's carefully crafted prescription benefit design and drive up overall drug costs.

As a brand's patent approaches its expiration, manufacturers shift gears, offering rebates to PBMs in exchange for premium formulary placement. Although rebates may seem like an opportunity to lower costs, they often have the opposite effect. The savings from these rebate agreements do not always benefit the client directly, and instead, can increase total drug spend. In the long run, these manufacturer-driven strategies may work against a plan’s financial goals, inflating costs while offering limited real savings to the organizations they claim to help.

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Take control of your pharmacy benefits with proactive strategies that align with your financial goals. Contact APC today to learn how we can help you navigate the complexities of drug pricing, optimize your PBM selection, and protect your bottom line.