Trump admin proposes reform to drug rebate system

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Trump admin proposes reform to drug rebate system

By Sandra Levy - 02/01/2019
Health and Human Services secretary Alex Azar and inspector general Daniel Levinson on Thursday proposed a rule to lower prescription drug prices and out-of-pocket costs by encouraging manufacturers to pass discounts directly on to patients and bring new transparency to prescription drug markets.

“Every day, Americans—particularly our seniors—pay more than they need to for their prescription drugs because of a hidden system of kickbacks to middlemen. President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy,” Azar said.

Azar went on to say that the proposal "has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need.”

The HHS proposal would exclude rebates drug manufactuers pay to pharmacy benefit managers, Medicare Part D plans and Medicaid managed care organization from safe harbor protection under the Anti-Kickback Statute, the Administration said. It would create a new safe harbor for prescription drug discounts offered directly to patients, as well as fixed-fee service arrangements between drug manufacturers and PBMs.

Under the proposed rule, prescription drug rebates that today amount to, on average, 26 to 30% of a drug’s list price may be passed on directly to patients and reflected in what they pay at the pharmacy counter. By encouraging negotiated discounts that are reflected in cost-sharing methods like co-insurance, used for many expensive drugs in Medicare Part D, the proposal is projected to provide the greatest benefits to seniors with high drug costs, Azar said.

The Pharmaceutical Manufacturers Association applauded the Administration for taking steps to reform the rebate system to lower patients’ out-of-pocket costs. “Our current health care system results in patients often paying cost-sharing based on the list price, regardless of the discount their insurer receives. We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy,” PhRMA president and CEO, Stephen Ubl, said.

Ubl continued, “This proposal would also fix the misaligned incentives in the system that currently result in insurers and PBMs favoring medicines with high list prices. These types of reforms will especially help patients with chronic diseases, such as diabetes patients who rely on insulin, who are often not benefitting from significant rebates and discounts. In addition, research released last year from Milliman found sharing negotiated discounts at the pharmacy could save seniors with diabetes more than $350 annually.”

The Association for Accessible Medicines also issued a statement praising the Administration. “AAM applauds the Administration’s efforts to reduce high brand drug costs for patients. Too often, brand drug companies are using rebate traps to block patient access to more affordable generic or biosimilar medicines. We look forward to reviewing the proposal and working with the Administration to ensure that America's patients have access to more affordable generic and biosimilar therapies.”