PHARMA¢â‚¬â„¢S BIG DEFEAT: US Rebate Proposal Hits ... The rebate proposal released in Janu-ary would have

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    Vol. 81 / No. 28 July 15, 2019


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    10 July. In a statement, the White House said, “Based on careful analysis and thor- ough consideration, the president has decided to withdraw the rebate rule.”

    “The Trump Administration is encour- aged by continuing bipartisan con- versations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” the White House press office said.

    The rebate proposal released in Janu- ary would have revised the existing an- ti-kickback safe harbor for rebates and replace it with a safe harbor that pro- tects upfront discounts that are passed through to beneficiaries at the point of sale through a new system.

    It was in the final phase of bureaucratic re- view, under evaluation by the White House.

    While there was broad support for changing the rebate system, which shrouds the cost of drugs in a cloak of secrecy and doesn’t always benefit the patients who buy medicines, critics said the proposal would result in higher in- surance costs and that it would elimi- nate the biggest tool payers rely on to drive down the costs of drugs. Pharmacy benefit managers (PBMs) and insurers were generally critical of the proposal.

    Drug companies, on the other hand, have been pushing the rebate story for close to two years, trying to convince legislators and the public that increased list prices have largely been offset by higher rebates, and eliminating rebates

    PHARMA’S BIG DEFEAT: US Rebate Proposal Hits The End Of The Road JESSICA MERRILL

    T he White House will not move forward with a proposed rule to eliminate manufacturer rebates, delivering a defeat to the industry, which had lobbied heavily in favor of the policy change. It is the second big proposal from the Department of Health and Hu- man Services blueprint on drug pric- ing to go up in smoke this month after a federal judge struck down the Trump Administration’s rule requiring the dis- closure of drug prices in TV ads.

    Unlike with the direct-to-consumer (DTC) ad policy, industry advocated in

    favor of eliminating rebates, the pay- ments it makes to payers off the list price of drugs to negotiate placement on drug formularies. Those payments are made directly to payers, who say they help to lower insurance premiums, but the big drawback is that those payments do not usually make their way directly to patients paying for drugs at the point of sale. As a result, patients can end up fronting the full cost of those medicines, depending on their insurance coverage.

    The Office of Management and Budget officially removed the rebate proposal on


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    or giving them directly to consumers would help to alleviate the problem.

    When seven big pharma leaders testi- fied before the Senate Finance Commit- tee on drug pricing in February, rebate reform was one of the policy initiatives the CEOs said would help lower drug spending. (Also see “Big Pharma Defuses Drug Pricing Landmines On Capitol Hill “ - Scrip, 26 Feb, 2019.)

    PHRMA SPEAKS FOR PHARMA The Pharmaceutical Research and Manu- facturers of America (PhRMA) said in a statement, “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 insur- ance companies money. It is disappoint- ing that despite support from policymak- ers on both sides of the aisle and from a wide array of consumer, patient, pharma- cist and provider groups that they have decided to backtrack.”

    Drug companies reached for comment widely pointed to PhRMA’s statement and avoided giving any individual reaction.

    Across the health care spectrum, there were concerns about upending a system by the 1 January 2020 deadline without a careful transition.

    The implementation of a sweeping re- bate change seemed almost inevitable until it suddenly seemed highly unlikely in May. That was when the Congressio- nal Budget Office estimated the proposal would increase federal spending on Medi- care Part D by about $170bn from 2020 to 2029 and would raise federal spending on Medicaid by $7bn. (Also see “One More Score: CBO Projects HHS Rebate Proposal Would Boost Part D Spending $170bn” - Pink Sheet, 2 May, 2019.)

    Owning a policy that substantially increased federal spending, especially should it turn out to deliver a financial windfall to big pharma, was considered unpopular heading into the 2020 elec- tion cycle.

    Pharmaco-economic specialist Peter Bach, director of the Center for Health Policy and Outcomes at the Memorial

    Sloan Kettering Cancer Center, has ad- vocated in favor of reforming the rebate system but nonetheless had concerns with HHS’ proposal.

    “It was not good policy in isolation as it removed a source of leverage from PBMs that helped to hold down net prices,” he said after the proposal was revoked. “I am not a fan of rebates that are not passed through at the point of sale, but dumping them and not replacing them with another mechanism to hold prices down would have led to a huge transfer f