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Analysis

PBM Lobby Raps 'Poorly Conceived' HHS Drug Rebate Proposal

By John Commins  
   April 08, 2019

The pharmacy benefits managers-backed study says it would be 'premature' for policymakers to adopt the rule without better understanding its impact.

The federal government's proposed rule on prescription drug rebates is getting panned by the pharmacy benefits management lobby.

"The Administration has expressed a strong concern about the cost of prescription drugs in the U.S. healthcare system. Oddly, the proposed rule will increase revenues and reduce costs for drugmakers," said Alex Brill, CEO at Matrix Global Advisors, the author of a study commissioned by the Pharmaceutical Care Management Association.

According to Brill, the proposed rule, released in February by the HHS Office of Inspector General, would "raise net drug prices in Medicare Part D under the guise of reducing list prices, shift drug costs from the commercial market to the Medicare Part D market, and raise costs on all Medicare beneficiaries through higher premiums in order to lower out-of-pocket costs for those with expensive prescription drugs."

"More concerning is the uncertainty regarding the effects of the proposed rule in numerous critical regards," Brill wrote. "It would be premature for policymakers to proceed without better understanding the proposed rule's impact on federal healthcare programs and beneficiaries, its far-reaching effects in the drug supply chain, and its indirect effects on the commercial market."

PCMA issued a media release calling the HHS proposal "poorly conceived." J.C. Scott, president and CEO of PCMA, said the analysis his association paid for "confirms that the proposed policy changes risk significantly raising costs for Medicare beneficiaries and taxpayers, disrupting Part D."

"PBMs share the Administration's goals. To better achieve them, we believe that if the proposed rule moves forward, it should be modified so that PBMs continue to be able to negotiate for lower drug prices for consumers and be empowered to help administer any new system."

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

Related: Sen. Chuck Grassley Questions Insulin Pricing Efforts

HHS unveiled the proposed rule in February, and said that eliminating rebates would incentivize drugmakers to lower list prices, and incentivize PBMs to negotiate greater discounts from drugmakers. Ultimately, HHS said, "the goal of this policy is to lower out-of-pocket costs for consumers and reduce government spending in Federal health care programs."

Brill said his report jibes with the Centers for Medicare & Medicaid Services Office of the Actuary concerns that restricting rebates will lead to lower price concessions by drug manufacturers, which will increase spending on prescription drugs and create a windfall for drugmakers.

Addressing the skyrocketing costs of prescription drug prices has been a top item on the agenda of Congressional Democrats and Republicans, and the Trump Administration. The Senate Finance Committee on Tuesday hosts executives from five leading PBMs as part of its ongoing efforts to address the issue.

“The Administration has expressed a strong concern about the cost of prescription drugs in the U.S. healthcare system. Oddly, the proposed rule will increase revenues and reduce costs for drugmakers.”

John Commins is a senior editor at HealthLeaders.


KEY TAKEAWAYS

HHS' proposed rule is supposed to incentivize drugmakers to lower list prices, and incentivize PBMs to negotiate greater discounts from drugmakers.

Critics say policymakers don't know the long-term effects of the proposed rule, which could lead to higher drug costs for Medicare Part D enrollees.

CMS actuaries say restricting rebates could lead to lower price concessions by drugmakers, which will increase spending and create a windfall for drugmakers.


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