The Trump administration is canceling a proposal to end rebates collected by pharmacy benefit managers from manufacturers under government healthcare programs, one of the signature components of its so-called blueprint to lower drug prices in the U.S.
The Washington Post reported Thursday, and several other outlets confirmed, that the administration had withdrawn the proposal. Citing two sources, the Post reported that there had been disagreement between Department of Health and Human Services Secretary Alex Azar and other White House officials regarding the merits of the rule. Advisers in the administration objected to the estimated cost of $180 billion over the next decade and fearing it would raise Medicare premiums.
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Shares of numerous major drugmakers fell on the news, while those of health insurers rose.
The news came just days after a federal judge in the District of Columbia struck down another rule under the blueprint requiring drugmakers to include list prices in television ads, a decision that one expert said was likely to go all the way to the Supreme Court.
In February, the Department of Health and Human Services had proposed excluding rebates that drugmakers offer to PBMs, Medicare Part D programs and Medicaid managed care organizations from safe-harbor protection under the Anti-Kickback Statute. In place of the rebate system, the new rule would create a safe harbor for discounts offered directly to patients and fixed-fee service arrangements between drugmakers and PBMs. However, Avalere Health Director Chris Sloan wrote in a series of tweets responding to the proposal that even though Medicare Part D beneficiaries would pay less at the pharmacy counter under the new rule, they would pay more in premiums.
The administration and others have maintained that the current rebate system – whereby PBMs are paid based on the spread between list prices and the prices they negotiate with manufacturers – creates an incentive for increasing list prices. Experts have said that the secrecy that surrounds the rebates encourages drugmakers to keep raising the list prices.
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However, although the administration has asserted that it has the power to crack down on the rebate system, experts have expressed doubts about how much HHS can really do on its own without an act of Congress. At the same time, some states have sought to act on their own, as Connecticut did when its governor signed a bill into law last year that would require PBMs to disclose the rebates they receive from drug companies, including how much they pass along to consumers versus how much they retain.
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