HHS Secy: Pres. Trump's drug proposal 'replaces system of backdoor deals'

Leslie Hanson
February 3, 2019

Under the proposal, the new rules would exclude from safe harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to pharmacy benefit managers, Part D plans and Medicaid managed care organizations.

Health and Human Services Secretary Alex Azar and Inspector General Daniel Levinson proposed a rule on Thursday to eliminate safe harbor for companies engaging in kickbacks associated with prescription drug rebates.

"This proposal would also fix the misaligned incentives in the system that now result in insurers and pharmacy benefit managers favoring medicines with high list prices", said Stephen J. Ubl, the chief executive of PhRMA, a trade group for drug makers.

The U.S. government on Thursday proposed a rule to end the industry-wide system of after-market discounts called rebates that pharmacy benefit managers (PBMs) receive from drugmakers, a practice that has been under increased scrutiny.

HHS admits enough in its proposal: "It is hard to predict the full extent of the transfers created by this proposed rule in the absence of information about strategic behavior changes by manufactures and Part D plan sponsors in response to this rule". "And. removing some of the current gaming where plans/PBMs have an incentive to favor heavily rebated drugs over drugs with lower overall prices would be positive for consumers and for the system as a whole", said Jack Hoadley, PhD, of the Georgetown University Health Policy Institute, in an email to MedPage Today. He expressed hope that Democrats would work with him on this and the administration's other drug pricing proposals.

The effort is created to cut costs for senior citizens at the pharmacy counter and by its example could spur changes in the broader market for prescription drugs.

The health insurance industry said that the proposal lets big pharmaceutical companies off the hook for their role in high drug prices. They're usually passed along to health plans, but don't always make it to the patients taking the drugs.


Further, to the extent this change reduces beneficiaries' OOP costs, it should reduce the number of beneficiaries in Medicare Part D who reach the catastrophic phase, as OOP costs are used to determine when a patient moves from one phase of coverage to the next.

Rebates for prescription drugs now account for 26%-30% of a drug's list price, on average, according to the fact sheet.

President Donald Trump and Azar have made constraining drug prices a central piece of their health-care agenda.

Consumers are anxious about prices for brand-name drugs, particularly new medications that promise breakthrough results. They say drug pricing is like a black box, and it's impossible to tell if prices reflect actual costs or if companies are charging what they think the market will bear. Lamar Alexander, R-Tenn., said in a statement. Insurers say they use the money from rebates to hold down premiums for all consumers.

Drugmakers applauded the administration's action. "Big Pharma has been working nonstop to deflect attention from outrageously high prices by convincing Americans that health insurance providers and their PBM partners are the problem, acting as so-called 'middlemen, '" Matt Eyles, the CEO of America's Health Insurance Plans, the industry's main lobbying group, said in a statement. Part of the proposal included requiring the disclosure of list prices in television ads, increasing negotiated discounts in Medicare, banning pharmacy gag clauses, adopting real-time prescription benefit tools, and boosting low-priced generic and biosimilar competition. Generics account for almost 90 percent of prescriptions filled, but brand-name drugs account for more than 70 percent of the spending. And drugmakers then merely build that expectation into their prices.

Before joining the Trump administration, Azar was a top executive for drugmaker Eli Lilly. But the drugmakers vehemently disagree with some of his other ideas, including an experiment using lower global drug prices to cut some Medicare costs.

Other reports by Iphone Fresh

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