Trump Administration Drops Proposed Rule to Eliminate Drug Rebates

A proposal to block rebates and discounts from drug makers has been withdrawn. The proposed rule was first announced at the end of January by HHS Secretary Alex Azar.

His agency and the Office of the Inspector General had said the current rebate system created a "perverse incentive" and the new rule would treat drug rebates in Medicare Part D and Medicaid managed care plans as kickbacks.

Politico reported that the Trump administration was withdrawing the proposal less than a month after it reported that the White House and Azar were at odds over the rebate proposal. Not only would the rule have excluded rebates from safe harbor protections, but it also would have created new protections for the discounts to be passed directly to patients at the pharmacy counter.

In April, at Asembia’s 15th annual Specialty Pharmacy Summit, the rebate proposal was top of mind, but a lot of uncertainty remained around how much the rule might actually benefit patients and if there was enough time before the changes were supposed to go live on January 1, 2020.

At the meeting, George Van Antwerp, managing director at Deloitte, explained that there could be unintended consequences of eliminating the rebates.

“Rebates have been used to keep everybody’s cost, even the healthy people, down,” he said. “Now, you’re going to see only the people that have high brand usage [or] high specialty usage really be the people who see the benefit of the rebate, because they’re going to go directly to that patient….”

After the news broke, Reuters reported that shares of UnitedHealth Group, McKesson, CVS Health, and Walgreens Boots Alliance all rose.

The Pharmaceutical Care Management Association (PCMA), which represents PBMs, had expressed concerns over the proposed rebate rule when it was first announced and pointed to the role that drug makers had in the high cost of drugs.

“We understand that high prescription drug prices are a burden for too many Americans. There is still a problem of affordability for consumers that must be addressed, and PBMs look forward to working with policymakers to advance solutions,” PCMA President and Chief Executive Officer (CEO) JC Scott said in a statement. “Only drug manufacturers have the power to set drug prices. We believe that the key to lowering drug costs is to enact policies that encourage greater competition.”

Matt Eyles, president and CEO of America's Health Insurance Plans (AHIP), echoed the comment that drug makers solely controll drug prices and price increases. He also noted that with the proposed rebate rule being dropped, other solutions are still needed.

“AHIP joins the Administration and the Congress in their goal of lowering costs and making drugs more affordable and accessible for all Americans," he said. "We will continue to work with them, and all stakeholders, to find bold solutions that promote greater competition, open and honest drug pricing, and paying for value. By focusing on these solutions, we can lower what patients and consumers pay at the pharmacy counter, in premiums, and in taxes—making health care more affordable and accessible for everyone.”