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Analysis

R.I.P. Rebate Rule: Centerpiece Plucked From Trump's Drug Pricing Blueprint

By Steven Porter  
   July 11, 2019

The administration abandoned its proposal to reduce prescription drug costs by curbing the rebates negotiated between PBMs and drug makers.

An ambitious proposal that threatened to kill the rebates pharmacy benefit managers (PBM) negotiate with drug manufacturers has instead been left for dead.

President Donald Trump decided to withdraw the rebate rule after a thorough review, a White House spokesperson told The Wall Street Journal and other news outlets Thursday morning. While the PBM lobby panned the proposal as "poorly conceived," some patient advocacy groups praised the idea, which was a major piece of the administration's drug pricing blueprint released last year.

"We're very much eliminating the middlemen," Trump said from the White House lawn, with Health and Human Services Secretary Alex Azar by his side, when the blueprint was unveiled.

Unwilling to take a purely defensive position, however, the Pharmaceutical Care Management Association (PCMA), an industry group that represents PBMs, responded to the proposal with a public relations counteroffensive. In light of the decision to withdraw the controversial rebate rule, PCMA President and CEO JC Scott issued a subdued statement Thursday.

The Campaign for Sustainable Rx Pricing (CSRxP)—a coalition that claims PCMA, America's Health Insurance Plans (AHIP), the American Hospital Association, and other major industry groups as members—issued a more celebratory statement.

"This decision is a huge win for America's seniors and a huge loss for Big Pharma," CSRxP executive director Lauren Aronson said. "We applaud the administration for seeing through Big Pharma's blame game and making the right call to withdraw this controversial rule."

Dropping the rebate rule will allow the White House and Congress to work together on solutions that will lead to lower drug prices, Aronson said.

The administration's reversal is likely to be welcomed by major PBMs, which include Cigna's Express Scripts, CVS Health's Caremark, and UnitedHealth Group's OptumRx—which saw their stock prices rise Thursday morning.

Rule's Proponents Miffed
 

Not everyone, of course, is pleased. Lindsay Bealor Greenleaf, director of policy at the pharma and life sciences consulting firm ADVI Health, said the administration is missing a major opportunity to lower the prescription drug costs shouldered by patients.

"This is very disappointing, and means pharmacy benefit managers and other middlemen in the supply chain will continue to inflate prescription drug prices," Greenleaf said in a statement. "Interactions with middlemen throughout the supply chain is why manufacturers retain less than 60% of total spending on prescription drugs."

A spokesperson for Pharmaceutical Research and Manufacturers of America (PhRMA) called the administration's decision "a blow to seniors who could have paid less for their medicines at the pharmacy counter."

"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 insurance companies money," the PhRMA spokesperson said in a statement. "It is disappointing that despite support from policymakers on both sides of the aisle and from a wide array of consumer, patient, pharmacist and provider groups that they have decided to backtrack." 

Jim Greenwood, president and CEO of the Biotechnology Innovation Organization (BIO), similarly mourned the rebate rule's demise.

"It is deeply disappointing the administration succumbed to the same old scare tactics we see from the insurance industry whenever policymakers aim to address the discriminatory tactics insurers use against patients," Greenwood said in a statement. "The president has promised to rein in the role of middlemen and ensure patients directly benefit from the significant rebates biopharmaceutical companies provide, but today that promise was broken."

Did Azar Lose?
 

Azar, who used to be president of drug maker Eli Lilly's domestic division, has publicly touted the rebate proposal as one way to tackle an indispensable component of the goal to curb drug spending.

"Any approach to drug pricing that does not tackle the issue of rebates—whether through our proposed approach or otherwise—will not deliver the results we need on any of those fronts," Azar said in a speech earlier this year.

Behind the scenes, however, Azar has been at odds with senior White House advisers who sought to weaken the proposal or delay it, as the Journal's Stephanie Armour reported, citing four unnamed sources "familiar with the discussions." (This news comes less than a month after Politico reported White House officials "have soured" on Azar.)

The decision to back away from the rebate rule wasn't the first blow this week to the administration's drug pricing policy agenda. A judge on Monday vacated a rule that would have required drug makers to disclose prices in direct-to-consumer TV ads.

This story has been updated to include statements from PhRMA and BIO.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The rule faced fierce opposition from PBMs and other industry groups.

The withdrawal reportedly comes after HHS Secretary Alex Azar wrangled with White House aides over the proposal's scope.

This is the administration's second setback on drug pricing reforms this week.


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