Drug rebates are influential financial tools in today’s healthcare systems. A rebate is a post-sale discount paid by a drug manufacturer for broader access to a target population, increased volume, and as a competitive aspect compared to similar therapies. In that sense, rebates are not random discounts, but strategic pricing arrangements.

Pharmacy vs. Medical: A Tale of Two Billing Environments

Pharmacy claims include the National Drug Code (NDC), a product-specific identifier that enables precise tracking of which drug was dispensed, and at what strength. Medical claims, submitted through the X12 837 format, use HCPCS codes, including J-codes for physician-administered drugs that may identify a drug category rather than a specific product. This distinction makes it harder to tie a medical claim to a specific manufacturer, a necessary step in rebate contracting. Timing adds another layer of complexity; pharmacy transactions are adjudicated in real time at the point of dispensing, while medical claims are typically submitted after the service has been provided, introducing delays in submission, adjudication, and reconciliation that make medical rebate tracking more difficult from the start.

On the medical side, there is no single, standardized billing channel. Contracting may involve insurers, hospital systems, large medical groups, or third-party administrators. This makes medical drug rebates harder to identify, capture, and reconcile.

Closing the Gap Between Payers and Employers

Data shows a clear difference in how health plans and employers understand and utilize medical drug rebates. According to the 2025 Trends in Specialty Drug Benefits Report from Pharmaceutical Strategies Group (PSG), only 35% of employers currently receive medical drug rebates, compared with 76% of health plans. Larger employers are far more likely than smaller ones to capture them. For many organizations, the opportunity is real, but they are missing the infrastructure, data access, and contracting strategy to act on it.

Who ultimately benefits from rebates depends on how arrangements are structured. Insurers or PBMs may retain a portion; some share may be passed to the employer or plan sponsor. On the medical side, large provider systems may negotiate directly and keep the value internally. For patients, the picture is often murkier; even when a payer’s net cost falls after rebates, patient out-of-pocket costs are typically based on the drug’s list price or a cost-sharing design that doesn’t reflect those savings, meaning that patients may be unlikely to benefit. This disconnect is central to why rebates remain a point of ongoing debate.

From Cost Lever to Strategic Tool

Rebates are not inherently problematic. When managed effectively, they can reduce overall drug spending without restricting patient access to important therapies. PSG frames medical rebates as an underused but increasingly important lever, particularly as specialty products continue to blur the lines between pharmacy and medical benefits.

Two themes are likely to define rebate strategy going forward. The first is data integration. As specialty drug spending grows, connecting pharmacy and medical claims data allows employers and payers to evaluate therapies on a true net-cost basis, identify missed rebate opportunities, and move from basic rebate capture strategies to more sophisticated optimization approaches. The second is transparency. Employers are becoming more aware that rebates can exist without appearing in standard reporting. That means that more organizations are demanding clearer answers about rebate ownership, pass-through rates, payment calculations, and reconciliation timelines.

Conclusion

Rebates shape coverage decisions and influence how drug costs are distributed across the system.  Their value depends on who captures the rebates, how transparent they are, and whether they are aligned with what plan members pay. For employers and plan sponsors, the question is no longer whether both pharmacy and medical rebates matter. It’s whether your organization has the tools and contracts in place to benefit from them.