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PBMs Applaud Trump Administration Withdrawing Rebate Rule, Stocks Soar

By Jack O'Brien  
   July 11, 2019

Thursday's announcement was warmly received by pharmacy benefit managers.

The Trump administration's decision to pull back its contested prescription drug rebate rule garnered strong support from pharmacy benefit managers (PBM) Thursday morning. 

The Pharmaceutical Care Management Association (PCMA), a national association representing PBMs, applauded President Trump's withdrawal of a proposed rule that would have effectively eliminated rebates passed along to PBMs while negotiating with prescription drug manufacturers.

The move was a centerpiece of the administration's attempts to foster greater accountability and transparency over high prescription drug costs, but found significant resistance among the PBM community.

"We understand that high prescription drug prices are a burden for too many Americans," JC Scott, CEO of PCMA, said in a statement. 

"There is still a problem of affordability for consumers that must be addressed, and PBMs look forward to working with policymakers to advance solutions," Scott said. "Only drug manufacturers have the power to set drug prices. We believe that the key to lowering drug costs is to enact policies that encourage greater competition." 

Scott continued: "We will continue to work with the Administration and Congress to deliver real solutions so that those that need it the most have access to affordable prescription drugs.”

Related: Trump's War on Middlemen Might Reach Well Beyond PBM Rebates

In early April, six weeks after drugmakers testified on Capitol Hill, representatives from the five largest PBMs told the Senate Finance Committee that they were committed to helping lower prescription drug prices while criticizing the proposed rebate rule.

Executives stated that the rule would cause premiums to rise and force PBMs to drastically change their business models without requiring the same concessions from pharmaceutical companies.

However, not all PBMs were critical of the rebate rule, as Jake Frenz, CEO of SmithRx, a San Francisco-based PBM told HealthLeaders that "only way to generate true price competition is to make it clear to all parties how much drugs really cost." 

Related: PBMs Launch Counteroffensive as Trump Administration Floats Plan to Eliminate 'Middleman' Drug Rebates

Thursday's announcement was also well-received on Wall Street, where four companies who own a PBM saw their respective stocks rise during early morning trading.

Cigna Corp., which owns Express Scripts Holding Co., led the way as its stock rose nearly 15%

Meanwhile CVS Health, which oversees its CVS Caremark PBM, was up nearly 7%, followed by UnitedHealth Group, which owns OptumRx, at nearly 5%.

Anthem recently introduced its own PBM, IngenioRx, and saw its stock up nearly 4%.

"The withdrawal is positive for health insurers that own large PBMs, as the proposal would have disrupted the economics of the PBM business model," Dean Ungar, vice president of Moody's Investors Service, said in a statement to HealthLeaders on Thursday. "While insurers could have adjusted to the impact of the elimination of rebates on their government business, if a similar policy on rebates migrated to the commercial space it could have had a larger impact."

Editor's note: This story has been updated to include a comment from Moody's.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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