New Rules Seek To Lower Prescription Drugs Costs

Trump proposal would upend drug industry by overhauling rebates in Medicare

Trump proposal would upend drug industry by overhauling rebates in Medicare

The drug lobby PhRMA welcomed the proposal, saying it could help patients with chronic conditions such as diabetes who use insulin, which has seen steep year-on-year rises in prices.

"The HHS proposal would expressly exclude from safe harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to pharmacy benefit managers (PBMs), Part D plans and Medicaid managed care organizations", states a press release from HHS.

Those rebates have been called anticompetitive by critics, who blame them for forcing many patients to pay more out of pocket. In October, the administration announced a plan to propose changes to Medicare drug pricing.

"A shadowy system of kickbacks", was how Health and Human Services Secretary Alex Azar described the current system in a Friday speech. The proposed effective date for this safe harbor is sixty days after the publication of the final rule. "The U.S. health-care system is a sandcastle and the tide is coming in". Furthermore, lower list prices and upfront discounts will translate into savings during the deductible, coinsurance, and coverage gap phases of the benefit.

The proposed rule could undercut the existing incentive for PBMs to favor drugs with higher rebates over drugs, like biosimilars, that have lower costs, and could allow for increased biosimilar uptake if drug makers choose to compete on price.

Patients with high drug copays stand to benefit from the proposal, while people who take no prescription drugs, or who rely on generics mainly, would probably pay somewhat more, since premiums are expected to rise.

In a video posted to Twitter Saturday Azar said the proposal has the potential to be the "most significant change in how drugs are priced at the pharmacy counter ever".

The administration said that the rule would apply to federal health programmes, though private plans could also implement the changes.

The reduction in price may not involve a rebate, as defined in 42 C.F.R. 1001.952 (h), unless the full value of the reduction in price is provided to the dispensing pharmacy through a chargeback (or a series of chargebacks), or the rebate is required by law.

And Express Scripts spokesman Brian Henry told Healthcare Dive "rebates are just one funding mechanism in the basket of services" it offers, adding, "it is short-sighted to look at one component of our offering as having a disproportionate impact on our business model".

HHS has proposed to eliminate drug kickbacks and rebates passed from manufacturer to pharmacy benefits manager (PBM), instead requiring those types of savings to be passed directly to patients. A new safe harbor would be created for rebates on drug discounts offered directly to patients, as well as fixed-fee service arrangements between drugmakers and PBMs. "We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy". Eliminating safe harbor protections "would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries", he said in his statement for the PBM trade lobby.

It would be up to Congress to write new laws banning rebates in commercial plans that cover most working-age Americans, and the reception on Capitol Hill was mixed. Azar said the administration estimates Medicare Part D premiums will increase by three to five dollars a month, on top of an average premium of $40. "We are concerned that this is not the right approach".

"President Trump must work with Congress to deliver the real, tough legislation needed to actually drive down the price of prescription drugs for seniors and families across America." she said in a statement criticizing the plan.

"When you go into the pharmacy, there is something going on that you don't know about", Azar said in an interview.

"We applaud the Administration for taking steps to reform the rebate system to lower patients' out-of-pocket costs", Ubl said in a statement emailed to journalists.

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