Tuesday, 20 August, 2019

HHS seeks to end 'backdoor deals' to lower drug prices

Drug Flow Trump proposal would upend drug industry by overhauling rebates in Medicare
Gustavo Carr | 03 February, 2019, 23:36

Stephen Ubl, head of the lobbying group Pharmaceutical Research and Manufacturers of America, said in a statement the plan would "fix the misaligned incentives in the system that now result in insurers and pharmacy benefit managers favoring medicines with high list prices".

In a highly anticipated move to curb prescription drug prices, the Trump administration announced plans Thursday to effectively kill the rebates drug makers pay to pharmacy benefit managers. They're usually passed along to health plans, but don't always make it to the patients taking the drugs.

Health secretary Alex Azar has now confirmed plans to remove "safe harbour" provisions which allow the payments, which would then mean these payments would be judged as bribes.

Thursday's proposed rule change will undergo 60 days of public comment.

The changes are "potentially devastating to the current pharma ecosystem", said Eric Coldwell, an analyst with Baird Equity Research.

The health-care industry is split on the validity of those arguments.

Azar however, believes pharmaceutical companies - who largely applauded the proposal - will take the brunt of reduced profits.

No one is claiming that eliminating rebates would stop escalating list prices, even if all insurers adopted the practice. These PBMs administer prescription drug plans for insurers and employers. Some of those rebates go toward insurance premiums, while the middlemen keep some for themselves.

Rebates are a set percentage of the drugmaker's list price, which creates an incentive for both the manufacturer and the PBM to keep that list price high.

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Specifically, the proposal would eliminate any kickbacks or rebates that drug manufacturers offer to PBMs.

Azar says the change, if implemented, will encourage drug companies to cut their list prices to compete for business.

And Express Scripts spokesman Brian Henry told Healthcare Dive "rebates are just one funding mechanism in the basket of services" it offers, adding, "it is short-sighted to look at one component of our offering as having a disproportionate impact on our business model".

Here's how rebates work: Pharmacy benefit managers negotiate rebates from drug manufacturers to insurers in exchange for better coverage terms - often in the form of lower copays for brand-name drugs. A new safe harbor would be created for rebates on drug discounts offered directly to patients, as well as fixed-fee service arrangements between drugmakers and PBMs. The proposed safe harbor would not protect payment for the services that the PBM may provide to a health plan.

It would be up to Congress to write new laws banning rebates in commercial plans that cover most working-age Americans, and the reception on Capitol Hill was mixed.

"We are not middlemen, we are your bargaining power", Matt Eyles, head of the industry lobby America's Health Insurance Plans, said in a statement. "We are concerned that this is not the right approach".

House Speaker Nancy Pelosi reacted skeptically, saying the rebate proposal "puts the majority of Medicare beneficiaries at risk of higher premiums and total out-of-pocket costs, and puts the American taxpayer on the hook for hundreds of billions of dollars". "If enacted, the proposed rule should lower prescription drug prices for patients in government programs and help those with the highest prescription drug costs most of all, " said David Mitchell, president of Patients for Affordable Drugs. "This brings in savings to them every time they walk into the pharmacy", Azar said during his speech. A senior health official quoted by the news agency acknowledged that an increase of $3 to $5 on premiums could happen, but those who depend on prescription drugs for maintenance and to manage chronic issues will definitely see and feel the savings.

The reduction in price must be completely reflected in the price the pharmacy charges to the beneficiary at the point of sale. The proposal would "fix the misaligned incentives in the system" that now result in insurers and PBMs favoring medicines with high list prices, PhRMA CEO Stephen Ubl said in a statement.