Trump administration targets rebates blamed for inflating drug prices

The Trump administration on Thursday proposed an ambitious overhaul of the drug purchasing system in its latest bid to lower the cost of medicines.

The Department of Health and Human Services proposed eliminating a legal exemption and making the rebates drugmakers give insurance plans and middlemen in the drug supply chain subject to fines under the federal anti-kickback statute. It plans to create a new legal exemption for prescription drug discounts that are offered directly to patients.

The rule would fulfill part of President Donald Trump’s drug pricing blueprint. Health and Human Services Secretary Alex Azar first hinted to Congress last year he was looking at forbidding all drug company payments to pharmacy benefit managers — middlemen who negotiate drug prices — by leveraging anti-kickback laws.

Critics said the current “safe harbor” protection that empowers the rebate system creates an incentive for those middlemen and insurers to demand big rebates and then keep them as profits.

Under the current system, rebates are not typically passed through to patients, but insurers say they use the extra cash to keep premiums low.

HHS predicted that the change would lower Medicare beneficiaries’ out-of-pocket costs but increase premiums anywhere from 8 to 22 percent for most enrollees. Asked about rising premiums, a senior HHS official said the question seemed to be a “knee-jerk reaction” to protect the status quo, and that it could come out to a $3 to $5 increase per month.

The administration said that the rule would apply to federal health programs, though private plans may copy the strategy. Congress would need to get involved to push the rule for commercial insurance.

The drug lobby PhRMA applauded the proposal, saying it could especially help patients with chronic diseases such as diabetes who use insulin. But the trade group representing pharmacy benefit managers said efforts to eliminate rebates their negotiate must factor the impact it would have on Medicare beneficiaries’ access to affordable drugs and costs to taxpayers.

Article originally published on POLITICO Magazine

Source: https://www.politico.com/story/2019/01/31/trump-prescription-drugs-pricing-1140795
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The Article Was Written/Published By: sowermohle@politico.com (Sarah Owermohle)

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