Analyst: Can we start with the mechanics? When a rebate negotiation actually happens, what does the calendar look like?
Expert: More boring than people want it to be. Bid season for a January first effective date runs February to about June of the prior year. The formal request lands in March, you get four weeks, maybe five. Then clarifying questions, where they ask for things they already have. Deal's done by the end of June. Everything after that is paperwork and the clinical committee in the fall, which is theater.
Analyst: Theater how?
Expert: The pharmacy and therapeutics committee reviews the clinical file and votes. Fine. But in a category where five or six products move the same marker by roughly the same amount, the committee's job is to bless a decision the trade side made in June on economics. I sat through, God, thirty of those over eight years? Thirty-something. I can think of two where the clinical file changed the outcome, and both were safety, not efficacy. If your product is genuinely differentiated the committee matters enormously. If it isn't, and most aren't, you're buying position.
Analyst: I want to come back to that. First, who's actually in the room?
Expert: Us: me, the national account director for that book, our pricing and contracting lead who owns the model, legal on the back end. Them: a trade relations director and an analyst. Four to six people. The mythology is a vast negotiation with lawyers stacked up the wall. It's two people who've known each other nine years and a spreadsheet.
Analyst: And the spreadsheet is base rebate plus share tiers.
Expert: Base, tiers, and the fee stack. The fee stack is where all the movement has been. When I started in that seat the admin fee was two, two and a quarter percent of list. By the time I left it was five and a half, six on the big accounts, plus a data fee, plus whatever the aggregator entity charged for performing, so far as I could ever determine, nothing. And those fees are struck as a percentage of list, so they escalate every time list goes up, whether or not you took the increase for that reason.
Analyst: Give me the shape of gross to net across your tenure.
Expert: Lead product launched at about a twenty-one percent deduction off gross. When I left it was just under sixty. That's the March 2025 board number, so it's real, though the true-up moved it a point either way.
Analyst: Linear?
Expert: No. Two step-changes. 2021, then 2024. The 2024 one had nothing to do with any negotiation I was ever in.
Analyst: Okay. So how much of the sixty is the PBM?
Expert: Less than you want it to be. That's the part nobody likes. The single biggest line of gross-to-net erosion in our P&L was not the pharmacy benefit manager. Wasn't a close second either.
Analyst: Then where was it?