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The Trouble with Rebates
Rebates are a central feature of the U.S. drug market.
Manufacturers pay rebates to PBMs in exchange for favorable formulary placement or volume commitments.
Ideally, these rebates reduce net costs for patients. In practice, rebate flows are often… opaque.
Traditional PBMs typically share rebates with insurers but not directly with members. According to one study highlighted by the Commonwealth Fund, PBMs increased the share of rebates they passed to insurers from 78% in 2012 to 91% in 2016. Despite this improvement, smaller employers often receive less, and consumers pay pharmacy prices based on a drug’s inflated list price.
Also, because rebates are calculated as a percentage of the list price, PBMs have a financial incentive to favor higher‑priced drugs, undermining cost control.
This lack of transparency has drawn scrutiny from policymakers and employers. They argue that if rebates were fully passed through to patients or used to reduce premiums, insurers could lower out‑of‑pocket costs and mitigate premium increases. Utah is among the first states to legislate this principle.
Utah’s Rebate Pass‑Through Requirement
Utah’s House Bill 257 (Pharmacy Benefit Amendments) mandates that health insurers ensure PBMs handle manufacturer rebates in one of three ways:
pass the rebate directly to the consumer at the point of sale,
use the rebate to reduce the consumer’s premium, or
enhance benefits to reflect the rebate’s value.
Importantly, the law specifies that this requirement applies only to health benefit plans issued or renewed on or after July 1 2026. Plans in effect before that date are not subject to the pass‑through rule until they renew.
Implementing this reform is complex. PBMs must track rebates at the individual claim level to calculate member savings at the point of sale or attribute them to premium reductions. Insurers must redesign their benefit plans and systems to apply rebates either to premiums or to point‑of‑sale discounts. Regulators must issue guidance and monitor compliance.
Given the lead time until mid‑2026, many PBMs will need months to upgrade technology and renegotiate contracts. In the interim, members continue to pay list‑price‑based amounts, and employers may not realize the full rebate value..
Why Wait? Aphora Makes Rebates Transparent Today
Aphora Health’s rebate model already meets – and exceeds – the spirit of Utah’s 2025 law.
Aphora passes 100% of manufacturer rebates and discounts directly to the plan sponsor or members, with none retained as profit. Employers pay exactly what the pharmacy is paid for each drug plus a transparent administrative fee. There is no spread pricing and no hidden margins. Because Aphora’s revenue is delinked from drug prices, it seeks out the lowest net cost and the most clinically appropriate therapies rather than chasing the largest rebates.
Aphora Health’s benefits extend beyond rebate pass‑through. Real‑time reporting shows exactly how rebate dollars are applied, making audits and compliance effortless. Employers can choose to apply rebates at the point of sale, reduce premiums or enhance benefits, just as Utah’s law envisions. High‑touch care navigation guides employees to $0‑copay generics and cost‑effective therapies, improving adherence and outcomes.
And because Aphora already follows these practices, employers and brokers don’t need to wait until July 2026 or rely on PBMs to upgrade systems.
By partnering with Aphora now, brokers can offer clients a future‑proof pharmacy benefit that aligns with Utah’s forthcoming requirements. They gain transparency, reduce costs and ensure members see the full value of rebates. In a market where drug pricing and PBM practices face intense scrutiny, Aphora delivers the compliance, savings and member‑centric design that employers need, today.
