President Trump plan would channel prescription discounts to patients

Henrietta Strickland
February 3, 2019

Secretary of Health and Human Services (HHS) Alex Azar announced radical changes to the way drugs are paid for in a new proposed rule aimed at lowering out-of-pocket costs for patients, especially seniors. "That is a very hard task to segregate", Azar said during a conference with reporters on Friday following a speech at the Bipartisan Policy Center in Washington.

Under a proposed rule HHS released January 31, drug manufacturers would no longer be able to give rebates to pharmacy benefit managers, but they would be allowed to offer discounted prices directly to consumers.

PhRMA, the main lobbying group for drugmakers, has long blamed PBMs for driving up the cost that patients pay for prescription drugs.

While removing the safe harbor doesn't necessarily make rebates illegal, Azar expects the rule would "lead to a comprehensive reshaping" of the drug supply chain in the commercial space as well as Medicare and Medicaid.

"The proposed rule would eliminate the regulatory safe harbor for rebates as they exist today, replacing it with two, far narrower safe harbors created to directly benefit patients with high out-of-pocket costs and to change the way PBMs are compensated", Sachs said.

Generally, eliminating the rebates could increase the cost of health insurance, because rebates right now are often kept by health-insurance companies. Part of the proposal included requiring the disclosure of list prices in television ads, increasing negotiated discounts in Medicare, banning pharmacy gag clauses, adopting real-time prescription benefit tools, and boosting low-priced generic and biosimilar competition.

Still, there's some reason to believe pharma about the role of rebates. 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. That means consumers using expensive drugs might see their out-of-pocket costs go down. The proposed effective date for this safe harbor is sixty days after the publication of the final rule. The proposal, which if finalized would likely go into effect in 2020, doesn't apply to commercial plans.

"We welcome Congress to join us", Azar said.

In the announcement, Azar said since the proposal addresses the notion of drug rebates, this would relieve drugmakers of the pressure to provide larger and larger rebates to the PBMs, which are then reflected in annual price hikes, most typically on branded drugs. Frank Pallone (D-N.J.) and Richard Neal (D-Mass.) said in a statement Thursday.

Nonetheless, the administration's proposal appears to be in the mix as Congress gears up to craft legislation addressing prescription drug costs.

The Bipartisan Policy Center's chief medical officer was cautious. In addition, many seniors on Medicare have to pay the full cost of some drugs. The administration maintains that the current rebate system creates an incentive for increasing list prices. After recent industry consolidation into a few enormous companies, on the other hand, they might have the market power to charge very high fees, replacing much of the lost rebate revenue. Most of the health-care rules the administration has sought to change have gone through.

He noted a couple of ways in which the new policy could end up costing consumers more.

Drug prices coming down sounds like a setback for drug companies. While just 7 biosimilars have entered the United States market, they have seen relatively low levels of uptake.

That could actually be a huge victory for drug companies. "I don't think the notion of list prices as we now think of them will exist anymore", he said.

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

One cancer-focused group, the Community Oncology Alliance (COA), welcomed the rule. "While PBMs have become a convenient target in the fight against skyrocketing drug costs, in reality they serve as a last line of defense for the consumer", the company said in a statement.

Romney is a member of the Senate Health, Education, Labor and Pensions Committee, which has oversight on healthcare issues, including drug pricing.

Other reports by Click Lancashire

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