by Paige Minemyer, Robert King | Jul 11, 2019 8:43am
The Trump
administration has killed its plan to eliminate safe harbors for drug
rebates, dealing a blow to the pharmaceutical industry.
A White House
spokesman confirmed to Fierce Healthcare on Thursday that the controversial
rebate rule is dead after "careful analysis and thorough
consideration," declining to elaborate.
"The Trump
administration is encouraged by continuing bipartisan conversations about
legislation to reduce outrageous drug costs," said White House Spokesman
Judd Deere.
Under the rule, the
Department of Health and Human Services would lift safe harbor protections from drug rebates negotiated
by PBMs and instead offer them for pass-through discounts.
This follows significant pushback from payers, pharmacy benefit
managers and providers, who warned that nixing the safe harbors
in Part D could lead to higher premiums for patients.
PBM and insurer
industry groups also warned that ending rebates doesn't target the true source
of the problem: pharmaceutical companies.
"Only drug
manufacturers have the power to set drug prices," according to a statement
from PBM lobbying group Pharmaceutical Care Management Association. "We
believe that the key to lowering drug costs is to enact policies that encourage
greater competition."
The Campaign for
Sustainable Rx Pricing — a coalition of hospital, insurer, PBM and physician
groups — took a victory lap after the announcement,
calling it a "big win."
"We applaud the
administration for seeing through Big Pharma’s blame game and making the right
call to withdraw this controversial rule," the group said in a statement.
Eliminating the rebate
rule is a blow to the pharma industry, which backed the plan and took great
lengths to shift blame for rising drug prices to PBMs and insurers.
A report from
the Congressional Budget Office suggested that eliminating
the rebates would increase Part D premiums and federal
spending.
But the rule had a
major proponent in HHS Secretary Alex Azar, who repeatedly called such rebates
"kickbacks." Azar, a former pharmaceutical executive, said that
rebates have created a perverse incentive to raise drug prices.
Azar has said at
multiple events that drug companies keep prices high in order to get on PBM and
insurer formularies. PBMs and insurers will only allow high-price drugs because
they get a cut of the rebate.
"We believe
today’s rebates, which help drive list prices skyward, are not necessary to a
strong negotiating ecosystem," Azar said last November during a speech at
the National Academy of Medicine. "They could be replaced with a model
driven by fixed-price, upfront discounts."
HHS said in a
statement on Thursday that Azar and Trump are still taking "bold
action" on lowering drug prices such as how to safely import cheaper drugs
and boost transparency.
However, the decision
is the latest setback for the agency's efforts to lower drug prices this week.
A federal judge on Tuesday blocked HHS' final rule that drug
companies put the list price in direct-to-consumer ads.
President Trump also
said that he will unveil in the next two weeks an executive order to install a
"favored nations" clause to ensure the U.S. doesn't pay more than
other countries on drug prices. The White House has not elaborated on what the
clause will apply to or when the order will drop.
This is a developing story and will be updated.
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