HHS Targets Drug Rebates to Lower Drug Costs

February 1, 2019

Proposed HHS regulation would pass rebates on to consumers

The Trump Administration has announced a plan to change how prescription drug rebates are handled. The plan would encourage drug makers to pass the rebates on to consumer and was announced by HHS Secretary Alex Azar. The goal of the proposed regulation is to help lower prescription drug prices and increase transparency in drug pricing. 

Azar called the rebates “a hidden system of kickbacks to middlemen,” in a statement from HHS. “President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy,” Azar says.

The proposal would eliminate legal protection for rebates paid by drug manufacturers to the insurers of people enrolled in Medicare and Medicaid. It is expected to have a ripple effect through the healthcare system. 

Under the proposed rule, prescription drug rebates could be passed on directly to patients and reflected in what the price they pay at the pharmacy. By encouraging negotiated discounts, the proposal is projected to provide the greatest benefits to senior citizens with high drug costs, according to HHS.

“The administration’s latest drug pricing proposal contains a meaningful change that community pharmacists have long supported and advocated for-moving certain types of remuneration to the point of sale so that the benefits of those price reductions are passed along to patients,” says NCPA spokesperson Andrea Pivaunas. “We encourage the administration to finalize a similar proposal in a recent proposed rule to include all pharmacy price concessions in the point of sale.” 

Finalizing that sort of a change would not only help achieve transparency, but “would also lower patients’ costs and improve medication adherence and health outcomes,” Pivarunas tells Drug Topics. “While we are initially encouraged by the latest administration proposal, which would help keep PBMs from using rebates to line their own pockets, we will continue to analyze the proposal for impacts on our members.”

Health insurers oppose the plan. “If not for health insurance providers and PBMs, drug prices and costs would be far higher. Projections show that over the next decade, we will save consumers and taxpayers more than $650 billion on drug benefit costs. We cannot achieve those savings if our leverage and negotiating power is weakened through well-intentioned but misguided actions like this proposed rule,” says Matt Eyles, president and CEO of America’s Health Insurance Plans. The trade organization released a statement following the HHS announcement. Eyles called the focus on rebates a distraction from the issue of drug prices. 

The pharmaceutical manufacturers praised the changes. “We applaud the Administration for taking steps to reform the rebate system to lower patients’ out-of-pocket costs,” says Stephen J. Ubi, president and CEO of the Pharmaceutical Research and Manufacturers of America. “Our current health care system results in patients often paying cost-sharing based on the list price, regardless of the discount their insurer receives. We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy.”