- This is the single biggest legislative action that could make a difference in bringing down drug prices.
- PBMs and insurers have also been accused of hanging on to a portion of the rebates to boost their profitability rather than passing the savings through to patients.
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Pharmaceutical and healthcare companies are bracing themselves for new regulations designed to lower drug prices in the US as President Donald Trump tries to fulfil his pledge to stop them “getting away with murder”.
Mr Trump is expected to give a speech outlining his plans as early as this week, after charging his health secretary and advisers with devising policies to shield patients from soaring healthcare costs.
The most radical proposal under consideration would effectively outlaw drug rebates, according to two people briefed on the speech, who cautioned that plans had not been finalised and were still subject to change.
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If enacted, such a policy threatens to plunge the industry into a protracted period of uncertainty and to scramble the business models of pharmacy benefits managers such as Express Scripts, CVS’s Caremark and UnitedHealth’s Optum, which act as middlemen during pricing negotiations.
It could also hurt the bargaining power of some drugmakers that offer hefty rebates to ensure they are reimbursed for their products.
In the US, pharma companies tend to set a high list price for their medicines before subsequently offering large discounts in the form of rebates to insurers, employers and government-sponsored schemes, commonly known as “the payers”.
In exchange for giving the rebates, the drugmakers demand the payers guarantee to reimburse them for their medicines and allow them access to a broad swath of patients.
However, rebating has come under growing scrutiny from policymakers amid claims it stokes drug price inflation: as payers have demanded larger rebates, pharma companies have protected margins by raising their list prices.
PBMs and insurers have also been accused of hanging on to a portion of the rebates to boost their profitability rather than passing the savings through to patients.
In a speech last week, Scott Gottlieb, the US Food and Drug Administration commissioner, raised the possibility that the practice could effectively be outlawed. Drug rebates are protected by federal law via an exemption that shields them from anti-kickback legislation, but he suggested that could change.
“What if we took on this system directly, by having the federal government re-examine the current safe harbour for drug rebates under the anti-kickback statute?” he asked.
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Such a policy could be achieved through regulatory changes and would not require new legislation or an executive order from Mr Trump, according to one source briefed on the proposal, which means it could be implemented relatively quickly.
One person familiar with the plans said Mr Trump had demanded his advisers come up with a high-profile policy that would make a splash and match his fiery rhetoric and tweets on high drug prices.
The real negotiated price of a drug after it has been rebated is a fiercely kept secret, known only by the payer and drugmaker, which critics say makes it impossible for a free market to operate.
“This is the single biggest legislative action that could make a difference in bringing down drug prices,” said Michael Rea, chief executive of Rx Savings Solutions, which makes software to help people cut the amount they spend on medicines.
He added: “It helps remove the complexity and chaos that has fuelled unsustainable price increases and allows an actual free market to take hold.”
Although the outlawing of rebates would prompt a big change in the way the system operates, pharma lobbyists say they are reasonably confident they have seen off the introduction of their nightmare scenario.
The three measures most feared by the industry were caps on drug prices, allowing the government to negotiate prices on behalf of retirees in the Medicare scheme and a loosening of regulations that make it impossible to “re-import” cheaper medicines from countries such as Canada.
In a statement last week, Alex Azar, the health and human services secretary, said the plan would “take aim” at four problems: “high list prices for drugs; seniors and government programs overpaying due to lack of negotiating tools; burdensome out-of-pocket costs for consumers; and foreign governments freeloading off of American innovation”.
Date: May 06, 2018
