White House Kills Plan for Drug Rebate Rule

Henrietta Strickland
July 11, 2019

At this juncture, the administration is moving forward with its plan to tie Medicare reimbursement for drugs to the lowest prices paid elsewhere.

"Based on careful analysis and thorough consideration, the president has made a decision to withdraw the rebate rule", Deere said.

Pharmacy benefit managers (PBMs) and other healthcare players are up premarket in reaction to the Trump administration's reversal on its proposed overhaul of rebates collected by the drug middlemen.

Politico noted the rebate proposal had been a centerpiece of the administrations strategy to lower drug prices. On the other hand, the news is a positive development for PBMs. Drug makers such as Pfizer (PFE) and Merck (MRK) were down slightly.

The rule would have excluded rebates from safe harbor protections that now shelter drug makers' rebates from penalties under the federal Anti-Kickback Statute and would have formed new safe harbor protections for discounts offered directly to patients, as well as fixed-fee service arrangements between drug makers and PBMs.

Budget projections showed the rule could cost the federal government roughly $177 billion in the next decade, and other policy experts anxious the rule would lead to higher premiums for Medicare beneficiaries. While Azar favored the rule, Grogan had reportedly opposed it over cost concerns. President Trump is expected to use an executive order to implement. The pharmaceutical industry and many conservative groups have vocally opposed that proposal, known as the worldwide price index, often on the grounds that it would implement "socialist" price controls.

HHS previously said that the rule would counteract incentives behind higher list prices; now, when a list price rises, patients who pay a percentage or all of the list price for a drug see their out-of-pocket expenses increase while PBMs reap financial rewards.

Other reports by Click Lancashire

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