Trump administration drops plan to curb drug rebates

Leslie Hanson
July 13, 2019

Drugmakers preferred the consumer rebate approach to other ideas that lawmakers are considering.

The practice, critics said, gives drugmakers a reason to keep list prices high, distorts incentives for drug plans who are supposed to prioritize the interest of their clients and leaves consumers paying more out of pocket for prescription drugs.

Earlier this year, the Trump administration asked Congress to scale back the complicated drug rebate system.

Right now, if you're a Medicare Part D beneficiary, and you need to pick up a drug that has a $120 list price, you might have to pay that full price, even if the middleman that negotiates on behalf of your insurer only pays a net price of $100 for it, after rebates.

Administration officials and Health and Human Services Secretary Alex Azar disagreed on whether the rebate rule would be worth the approximately $180 billion it would cost the government over a decade.

Rebates are not a new target for criticism in the debate over prescription drug prices.

The rule would have forced healthcare companies like Cigna and CVS Corp to forgo these discounts or pass them onto Medicare patients through their health insurance plans and drug plans.

Rebates had become a popular target of criticism in Washington after drug companies lobbied aggressively to cast them as the reason for high prices.

But some critics were concerned that the move wouldn't address drugs' list prices that are the starting point for negotiations. President Trump championed the rebates rule starting in spring 2018, but White House policy aides sparred with HHS over the scope and timing of the rule. "There was wide consensus with OMB leading on the charge on that". Meanwhile, insurers would raise premiums to compensate for the loss of rebates.


Pharmacy-benefit managers blame drug companies for soaring prices and have said that rebates help keep overall health costs down.

"Only drug manufacturers have the power to set drug prices". "This is a huge potential change, transformative", Dr. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh told NPR.

Drugmakers, however, called the decision "a blow to seniors".

White House spokesman Judd Deere said the proposal to create the rebate program was withdrawn "based on careful analysis and thorough consideration".

The Trump administration is backing down from a controversial effort to lower drug prices, only days after its first major industry reform was overturned by a federal judge.

It had been expected that the rule would shake up the marketplace for biosimilars; while just 7 biosimilars have entered the U.S. market, they have seen low levels of uptake.

Opposition to the plan within the administration reportedly had a political component as well, with senior White House advisers expressing concerns about increasing Medicare premiums ahead of the 2020 election.

Trump has embraced a proposal by Florida Gov. Ron DeSantis, R, for instance, to import lower-priced drugs from Canada.

The move marks yet another stumble for President Donald Trump in his quest to fulfill his campaign promise to reduce drug costs and comes as he's facing uphill court battles on several other top priorities. But he said that recent changes in who is distributing drugs "could open the door" to meeting those criteria. Azar said on Thursday that he planned to stay in his job as long as Trump wanted him there.

Other reports by Iphone Fresh

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