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HHS Finalizes Medicare Part D Drug Rebate Rule

Analysis  |  By Jack O'Brien  
   November 20, 2020

The announcement came the same day that the administration released the interim final rule for the "Most Favored Nation Model."

President Donald Trump announced Friday afternoon that the Department of Health and Human Services (HHS) finalized a rule to eliminate the current system of rebates for prescription drugs under Medicare Part D.

In a press release, HHS stated that excluding rebates paid by drugmakers to pharmacy benefit managers would resolve a "perverse incentive" and create a "safe harbor" that protects discounts at the point of sale.

HHS estimated that savings to patients might total nearly 30% based on the nearly $40 billion in Part D rebates from last year.

"Every year, Americans have suffered from drug prices driven constantly upward by a shadowy system of kickbacks, and the President is putting an end to that," HHS Secretary Alex Azar, said in a statement. "With the final rebate rule, we are taking on a broken system and delivering big discounts directly to American patients. Our action on rebates has the potential to be the most sweeping change to how Americans’ drugs are priced at the pharmacy counter, ever, by delivering discounts directly to patients and bringing much-needed transparency."

This is the second time the administration has considered this policy, after scrapping plans for a prescription drug rebate rule in July 2019.

Related: PBMs Applaud Trump Administration Withdrawing Rebate Rule, Stocks Soar

JC Scott, CEO of the Pharmaceutical Care Management Association (PCMA), an industry group that represents PBMs, warned that the rebate rule would increase premiums for taxpayers.

"Simply put, the HHS Secretary’s decision to advance the previously withdrawn rebate rule will drastically increase Medicare Part D beneficiary premiums and taxpayer costs," Scott said in a statement. "Given previous analyses from multiple private sector and government scorekeepers, this rule does not meet the President’s requirement in his Executive Order not to increase costs to beneficiaries or taxpayers."

The administration's announcement came the same day that Trump released the interim final rule for the "Most Favored Nation Model" and ended the Unapproved Drugs Initiative.

Addressing high prescription drug costs has been a cornerstone of the Trump administration's healthcare agenda since several failed attempts to repeal and replace the Affordable Care Act took place in 2017.

Friday's announcement came nearly four months after Trump signed four executive orders, including measures aimed at supporting the importation of prescription drugs from foreign countries and bringing Medicare prices in line with those found in other countries.

During a press conference at the White House, Trump said the "drug companies don't like me very much" for the two policies he announced.

Related: President Trump Signs 4 Drug Pricing Executive Orders

Meanwhile, in response to the final rule, Campaign for Sustainable Rx Pricing (CSRxP) issued a statement calling the policy decision "misguided" and a "Big Pharma bailout."

"The Big Pharma-backed Rebate Rule is a misguided proposal that the administration’s own actuaries found would do nothing to lower drug prices while increasing premiums on Medicare Part D beneficiaries, costing taxpayers more than $200 billion and handing drug companies a more than $100 billion bailout,” Lauren Aronson, executive director of the CSRxP, said in a statement. “CSRxP looks forward to working with the next administration and lawmakers to halt and reverse implementation of this disastrous policy in order to focus drug pricing efforts instead on market-based solutions to increase transparency, boost competition and hold Big Pharma accountable."

Related: Here's How to Get a Piece of the $2 Billion in Health Insurance Rebates This Year

Stephanie Kennan, senior vice president of federal public affairs at McGuireWoods Consulting, told HealthLeaders that the policy announcements like these are not unusual for outgoing administrations with two months left before Inauguration Day.

Kennan added that there is a sense of confusion around the timing of the drug pricing regulations as compared to other health policies on the agenda for the Trump administration.

"There has been so much internal debate and a lot of people weren't happy with some of the aspects of [the Most Favored Nation Model], so it begs the question, 'Why now?'" she said.

Editor's note: This story has been updated with additional commentary.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.


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