Recently, the Administration announced it was withdrawing a controversial plan to ban drugmaker rebates to pharmacy benefit managers in Medicare and Medicaid. The announcement, made by White House spokesperson Judd Deere, was made after “careful analysis and thorough consideration.”
The rule would have eliminated a safe harbor provision that allows drug manufacturers to pay rebates to insurers and PBMs without running afoul of anti-kickback rules. Such elimination would have meant that any discounts that PBMs negotiate with drug manufacturers would have to apply to the “list price” that patients using those drugs pay, instead of being used as rebates that reduce everyone’s premiums.
The idea was that over time, list prices would look more like the net prices of today, as the rebates were converted into direct price discounts. Such a change would theoretically mean lower out-of-pocket spending and better patient adherence to medications, especially for seniors enrolled in Medicare Part D prescription drug plans.
It would also mean more patients would opt for the low-cost generic and biosimilar drugs, as there would no longer be an incentive to PBMs to favor the brand-name drug in their formularies – unless, of course, the branded drugs were competitively priced with generics.
With the provision eliminated, drugmakers would have been encouraged to pay rebates directly to patients at the pharmacy counter, with the idea of reducing out-of-pocket expense. Thereby, many drug manufacturers favored the proposed rebate rule, arguing that payments they make to PBMs do not actually help patients afford their drugs any easier.
Shortly after President Trump announced the proposed idea, indications that a bumpy ride to approval started to show. Policy aides with the White House disagreed with the Department of Health and Human Services over the scope and timing of the rule, while some congressional members of the Republican party as well as consumer advocacy groups worried the plan would raise Medicare premiums. Then came the likely “death knell,” a report on the projected cost to the federal government: roughly $177 billion over the course of a decade.
In a statement released by PhRMA, the group expressed frustration at the decision, “The Administration’s decision to not move forward on the proposed rule to reform the rebate system in Medicare Part D is a blow to seniors who could have paid less for their medicines at the pharmacy counter. Of all the policies proposed in Washington right now, this was the only proposal that would provide immediate savings at the pharmacy counter, instead of only saving the government or insurance companies money. It is disappointing that despite support from policymakers on both sides of the aisle and from a wide array of consumer, patient, pharmacist and provider groups that they have decided to backtrack. Our industry remains committed to fighting for patients by advancing policies that will actually lower what they pay out of pocket for their medicines.”