The rule would have excluded rebates from safe harbor protections that now shelter drug makers' rebates from penalties under the federal Anti-Kickback Statute and would have formed new safe harbor protections for discounts offered directly to patients, as well as fixed-fee service arrangements between drug makers and PBMs. "We're going to fundamentally rewire how we pay for drugs in this system".
The White House first floated the idea of ending the rebates previous year as part of a drug pricing "blueprint" aimed at bringing down costs.
The White House on Thursday yanked its own regulation to ease the financial bite of costly medications for those on Medicare by letting them receive rebates that drugmakers now pay to insurers and middlemen. "This is a huge potential change, transformative", Dr. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh told NPR. Most European countries pay for citizens' healthcare and directly negotiate drug prices. The government's inflation index for medications also includes prices for lower-cost generics, and most consumers are anxious about high-priced brand drugs. The pushback grew after the nonpartisan Congressional Budget Office estimated the plan would have little impact on manufacturer prices and cost Medicare $177 billion over 10 years by leading to higher premiums subsidized by taxpayers. Azar said on Thursday that he planned to stay in his job as long as Trump wanted him there.
But without insurers getting the rebates, the bottom line would have been an increase in premiums. "I don't have those tools; they might have those tools".
Politico https://www.politico.com/story/2019/07/11/white-house-drug-rebate-rule-1405884 reported the news on Thursday and the White House confirmed the decision to Reuters.
PhRMA, the main pharmaceutical industry lobby group, disagreed, saying in a statement that the move ended the only government proposal that would have provided immediate savings at the pharmacy counter for patients.
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Other stakeholders cheered the administration's reversal of the proposed rule, including groups representing private insurers, public sector health plans and pharmacy benefit managers.
While the White House had argued eliminating rebates would result in drug manufacturers charging lower list prices, the proposal has been controversial since its unveiling in January.
The administration's about-face was the second setback in a week for the president's drive to lower drug prices. After mostly languishing this year, shares of companies that operate large pharmacy-benefit managers rallied, with CVS Health Corp. rising 7% to $59.23 at 9:35 a.m.in NY, while UnitedHealth Group Inc. advanced 3% to $254.98. "They alone could decide to reduce prices - and can do so today". That's another way to achieve a similar goal as the rebate plan.
Azar says the administration hasn't given up on lowering drug prices. "We are working on a bipartisan basis with Congress on drug pricing legislation".
The rebate plan was crafted by Health and Human Services Secretary Alex Azar but ran into opposition from White House budget officials.
The end of the rebate push is likely to swing discussion back toward the pricing practices of big drugmakers, and it could add momentum to other proposals that have been floated by the administration, such as tying drug costs to an index of global pharmaceutical prices. The administration has not released any details about how that would work or when it would roll out.