Rebate Contracts Research Articles

Improving Supply Chain Performance and Managing Risk Under Weather-Related Demand Uncertainty

We consider a manufacturer-retailer supply chain for a seasonal product whose demand is weather sensitive. The retailer orders from the manufacturer (supplier) prior to the selling season and then sells to the market. We examine how a manufacturer can structure a weather-linked rebate to improve his expected profit. The proposed class of rebate contracts offers several advantages over many other contract structures, including no required verification of leftover inventory and/or markdown amounts, and no adverse effect on sales effort by the retailer. We provide a thorough analysis of the manufacturer's and retailer's decisions in this context. We show that the weather-linked rebate can take many different forms, and this flexibility allows the supplier to design contracts that are Pareto improving and/or limit his risk in offering the contract and the retailer's risk in accepting it. For weather rebates with certain characteristics, the manufacturer can fully hedge his risks of offering a weather rebate by paying a risk premium; we show how this can be accomplished. We also show that the basic structural results extend to settings in which the two parties would like to limit their risk.

Regionale Unterschiede in der Nutzung des Aut-idem-Verbots bei Älteren nach Einführung der Rabattverträge

As of 1 April 2007, pharmacists in Germany filling prescriptions covered by the statutory health insurance system (Gesetzliche Krankenversicherung, GKV) are required, whenever possible, to dispense a preparation for which a rebate contract is in effect. The physician can block drug substitution by crossing out 'aut idem' ('or the like') on the prescription form, for which regional variations were found. We have studied the differences between physicians belonging to different regional Associations of Statutory Health Insurance Physicians (Kassenärztliche Vereinigungen, KVs) in the use of the no-substitution option in the elderly. We used claims data of the Gmünder ErsatzKasse (GEK) and drew a random sample stratified according to the 17 KVs and 3 age groups (65-74; 75-84; 85+ years) of at least 75 continuously insured persons in October 2008 per stratum. After that, all prescriptions in which the physician could potentially have exercised a no-substitution option were selected and all relevant original prescriptions were examined. All estimates were weighted according to KVs, age groups and sex as of the structure of the GKV. The sample comprised of 3 672 persons and 5 745 prescriptions. The percentage of no-substitution prescriptions was 20.1% (95% confidence interval [95% CI] 18.7-21.5) and we found no differences according to age and sex. Considerable differences were seen between the KVs that vary 6.8-fold between 6.2% (95% CI: 3.2-9.2) in Saarland and 42.2% (95% CI: 34.1-50.4) in Saxony. The use of the no-substitution option does not depend on age and sex of the patient but rather depends on regional factors. These considerable regional differences show that, in several regions, the use of the no-substitution regulation influences the effect of rebate contracts.

The Effect of Introducing Rebate Contracts to Promote Generic Drug Substitution, on Doctors’ Prescribing Practices

As of 1 April 2007, pharmacists in Germany filling prescriptions covered by the statutory health insurance system (Gesetzliche Krankenversicherung, GKV) are required, whenever possible, to dispense a preparation that contains the same active substance and for which a rebate contract is in effect. The physician can block drug substitution by crossing out "aut idem" ("or the like") on the prescription form. The latter option has existed since 2002. We studied the possible effect of the introduction of rebate contracts on the use of the no-substitution option. Three independent random samples were taken from the routine data of the Gmünder ErsatzKasse (GEK, a statutory health insurance carrier). The samples consisted of 0.5% of the insured adult population in the month of October in the years 2006, 2007, and 2008 (n = 6195; n = 6300; n = 6845). Within these sample groups, all medication orders in which the physician could potentially have exercised a no-substitution option were selected, and the corresponding prescriptions were examined. The percentage of no-substitution prescriptions rose from October 2006 to October 2007, and then rose still further to October 2008 (14.4%, 18.4%, 19.0%; p for trend < 0.0001). Considerable differences were seen between physicians belonging to different regional Associations of Statutory Health Insurance Physicians (Kassenärztliche Vereinigungen). In about one-quarter of the no-substitution prescriptions for 2007 and 2008 (25.1%, 25.7%), the prescribed medication was itself included in a rebate contract. The use of the no-substitution option is not uniform across Germany at present. Rebate contracts and the no-substitution option require further evaluation. Moreover, the dispensing of medications urgently needs a more stable regulatory framework.

Rebate Contracts: Risks and Chances in the German Generic Market

This paper provides an overview on the current developments in the German healthcare market. Rebate contracts between pharmaceutical companies and statutory health insurers (SHIs) have proven to be an effective cost containment measure. Increased price pressure in the generic market has led to significant changes in market shares within months. While international companies with broad product portfolios successfully used this instrument to enter the German market, small- and medium-sized enterprises with a narrow product spectrum often saw a decrease in market share. Moreover, the instrument of rebate contracts replaces early entry strategies and might increase profits via portfolio contracts. An overview is given on the new legislation with respect to prescribers and pharmacists together with a look at the framework of public procurement law. Strategic options for generic companies are presented in the context of this legal framework. In addition, considerations that pharmaceutical companies should take into account before negotiating rebate contracts with SHIs are highlighted.