Rebates

Drug companies set the price for their product but they offer rebates to insurance companies so these companies push that drug to the top of the list. The net effect is that the price to the consumer stays the same but the insurance company and the drug company share the profits. It the drug company raises the price the cost to the consumer goes up but the mark up is still shared between the drug company and the insurance company. The insurance company price to the consumer is set and does not include the rebate. For example. The drug company sells its product to the insurance company for $100 but offers a rebate of $20 so the net cost to the insurance company is $80 but they charge the consumer based on $100. The retail price is say $120 and the insurance company claims a profit of $20 but in actuality they made $40. The Trump plan gets rid of rebates. Rebates in the life insurance industry were outlawed many years ago.