Fig. 1.

Supply chain, initial payment, and rebates for pharmaceutical drugs. In the pharmaceutical supply chain (yellow line), drugs are moved from the pharmaceutical company to the wholesale distributor to the pharmacy or directly from the pharmaceutical company to the pharmacy. In the payment pathway, initial payment (green line) is essentially the reverse of the supply chain, with the addition of the pharmacy benefit managers acting as a third party aiding in financial negotiations. At each stage a percentage of payment is retained. Discounts on the initial payment can be made based on purchasing power and prompt pay. Rebates (orange line) are money that is paid back by the pharmaceutical company after initial payment. Pharmaceutical companies give rebates for preferential use the manufacturer’s drug, high volume of drug sales, and based on established government regulations