Bill Targets Commercial Drug Rebates, Out-of-Pocket Patient Costs

The legislation would echo recent HHS proposals to limit rebates for PBMs, calling instead to lower out-of-pocket patient costs.

By Sara Heath

March 07, 2019 - Proposed legislation would rework the rebates system for prescription drugs in the commercial health payer space, prohibiting rebates being passed from drug manufacturers to pharmacy benefits managers (PBMs). Instead, rebates savings should be passed to consumers, lowering out-of-pocket patient drug costs.

This legislation is joined by two other proposals that would address the drug approval process and drug oversight, each of which were introduced by Indiana Senator Mike Braun.

These bills come as Braun works to address the high healthcare costs incurred by his constituents, he wrote in a statement.

“Before being elected to the US Senate last year, I spent 37 years building a business in my hometown, hiring hundreds of Americans and taking on the insurance industry to give my employees quality affordable healthcare while covering pre-existing conditions,” Braun said.  “I’m offering solutions to address rising healthcare prices by adding transparency to our drug pricing, clearing the backlog on pending drug applications at the FDA, and providing oversight and accountability within the healthcare industry.”

The Drug Price Transparency (DPT) Act would essentially extend a recently-proposed rebate program into the commercial insurance space. PBMs would be prohibited from accepting a drug rebate from a drug manufacturer. Instead, the PBM would be required to pass any rebates savings along to patients at the point of care.

Although the policy aims to reduce out-of-pocket spending for some patients, Braun did acknowledge a potential pitfall. In place of rebates savings for insurers and PBMs, some experts are concerned patients’ premiums may increase. Any legislation should take that into account, Braun suggested.

As noted above, the DPT Act was modeled after a recent proposal from the Department of Health & Human Services (HHS).

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need,” HHS Secretary Alex Azar said in a statement about the public program’s proposal.

Drug rebates can amount to as much as 26 to 34 percent cost reductions in medications. And while most industry experts want to see the cost of medications go down, many agree those savings should be passed along to consumers.

Additionally, both the HHS and Braun proposals should lower the overall list price of a drug because it limits how much a PBM can benefit from a rebate. Typically, drug manufacturers and PBMs negotiate rebates as a percentage of a drug’s list price. To increase the rebate, the manufacturer will increase the cost of the drug, also boosting the cost to the patient.

Braun’s legislative proposals also address issues with the FDA’s drug approval process, mainly as it concerns new drugs that have already been approved in nations with similar health protocol.

The Accelerated Drug Approval for Prescription Therapies (ADAPT) Act would create an expedited FDA review for drugs that have already been approved in other developed nations with a history of comprehensive drug approval processes. Such nations might include those in the European Union, Israel, Australia, Canada, and Japan.

The expedited approval process would be about six months, Braun proposed. During that time, the HHS Secretary or FDA Commissioner would be able to approve a drug along the following criteria:

• The drug is lawfully approved for sale in a developed country
• The drug is not banned by any current FDA standards

Speedier approval processes would ideally create more drug development competition in the US, Braun said, which could lead to lower costs. Additionally, it could lead to improved patient care access.

Finally, Braun introduced the Efficiency and Transparency in Petitions Act, which would overhaul the oversight and petitions process for certain FDA approved drugs.

These policy proposals come as the healthcare industry shifts its focus toward the rising cost of drugs. These solutions are joined by recommendations to review list prices, rework insurance formularies, and address price transparency measures.

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