White House Drops Bid to Redirect Drug Rebates to Seniors

Kerry Dooley Young

July 11, 2019

WASHINGTON — The White House scuppered a proposed rule that would have redirected savings from rebates on drugs in the Medicare Part D plans toward seniors. The withdrawal of the rule is a win for insurers and middlemen in the pharmaceutical industry, but marks a loss for drugmakers.

The White House's Office of Management and Budget now lists a draft rule as having been withdrawn, with the agency saying on Wednesday that it completed its review of the proposal. White House and Department of Health and Human Services (HHS) officials said the administration still intends to pursue steps to try to lower drug prices.

When HHS first unveiled the rebate rule in January, it appeared to address President Donald J. Trump's May 2018 call for action to redirect savings from the "middlemen" — pharmaceutical benefit managers (PBMs) — toward people enrolled in Medicare Part D plans.

HHS Secretary Alex Azar promoted the rebate rule as an attempt to address "a shadowy system of kickbacks that long has drawn the ire of those concerned about prescription drug prices — both Democrats and Republicans," as reported by Medscape Medical News.

In a Thursday statement, the leader of the trade group for PBMs urged the Trump administration and Congress to look for other paths to bring down the costs of medicines.

"Only drug manufacturers have the power to set drug prices," said JC Scott, the chief executive of the Pharmaceutical Care Management Association.

"We believe that the key to lowering drug costs is to enact policies that encourage greater competition."

On Thursday, shares of firms that own PBMs rose after the rule was withdrawn. Shares of Cigna Corp., which owns the PBM giant Express Scripts, rose 9.2% to 175.34, beating a gain of less than 1 percent for the Dow Jones Industrial Average. Shares of CVS Health, another PBM operator, rose 4.7%.

Pharma Disappointed

The trade group for drugmakers, the Pharmaceutical Research and Manufacturers of America (PhRMA) said in a statement today that it was "disappointing" that the administration "decided to backtrack" on the rebate rule.

"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," PhRMA said.

Critics of the rebate rule had highlighted its potential drawbacks for consumers and benefit for the pharmaceutical industry. In their efforts to derail the rebate rule, groups such as the trade association for health insurers often cited research done within HHS itself.

When HHS proposed the rule, it included with it a report done by actuaries of the Centers for Medicare & Medicaid Services (CMS). The rebate proposal might have increased federal spending by $196 billion per decade, while average beneficiary costs would decrease, according to that CMS report.

People enrolled in Medicare Part D who need drugs that now have significant rebates would see a "substantial decrease in costs," but the majority of consumers affected would see an increase in premiums and other costs, the CMS actuaries said in their report.

The rebate rule would give drugmakers "a $100 billion windfall in new revenue," wrote Matthew Eyles, chief executive officer of America's Health Insurance Plans (AHIP), in an April comment to HHS.

On Thursday, Eyles urged Congress to take action against pharmaceutical companies to rein in rising costs.

"As we all know, drug prices and price increases are set and controlled solely by drug makers," Eyles said in a statement provided to Medscape Medical News. "They alone could decide to reduce prices — and can do so today."

Big Effort to Block the Rule

The Campaign for Sustainable Rx Pricing (CSRxP), a group that includes AHIP and PBMs and insurers as members, had for months been organizing protests against the rebate rule. CSRxP also lists several medical associations among its members.

CSRxP would not provide Medscape Medical News with a detailed breakdown of its sources of funding. It would say only that it gets funding from the members listed on its website. Organized as a 501(c)(6) business association, CSRxP is not compelled to disclose detailed information on funding.

In a statement released Thursday, CSRxP detailed its effort to block the rebate proposal. These included what the group called "a seven-figure, 20-state media and grassroots campaign against the rule."

CSRxP today also urged the Trump administration and Congress to take action against drugmakers — or "Big Pharma" — directly. In the view of CSRxP, the rebate rule reflected a bid by drugmakers to shift the blame for rising costs of medicines.

"As Big Pharma is quickly learning, things are different in Washington now, and policymakers must capitalize on the unprecedented momentum to crack down on the industry's egregious pricing practices," said Lauren Aronson, executive director of CSRxP, in the statement.

Public Citizen, a consumer watchdog group, noted that a federal judge recently blocked a separate Trump administration proposal to force drugmakers to disclose list prices in direct-to-consumer advertisements. Thus the withdrawal of the rebate rule is the second recent stumble for the administration's efforts to address drug pricing, according to the watchdog group.

"Now that two of the administration's signature drug pricing efforts have come to an end, it's time to push for real solutions by advancing direct government drug pricing negotiation, stopping price spikes, and taking on the monopoly power of prescription drug corporations," Public Citizen said in a statement.

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