A Freeze on the Trump-Era Drug "Rebate Rule" Stalls - April 2021
In recent years, the federal government has called for increased review (and transparency) into how pharmaceutical manufacturer rebates are being used and by whom. But as part of the Biden administration’s regulatory freeze on Trump-era rules, the most recent “Drug Rebate Rule” affecting Medicare Part D—set to take effect on January 29, 2021—was delayed even further until 2023.
The U.S. District Court for the District of Columbia has issued a court order delaying the Department of Health and Human Services’ (HHS) rule #0936-AA08 for almost two years. The rule, which changes payments to Pharmacy Benefit Managers in ways that disallow fluctuations based on the price of a drug, was slated to take effect January 2022.
The rule’s aim was to eliminate the rebates that pharmaceutical manufacturers pay to Pharmacy Benefit Managers (PBMs). PBMs are companies that manage—and negotiate—prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers and other payers. Rebates are discounts (off the list price) that drug manufacturers offer (as they do every plan year) to become part of a health plan’s preferred drug formulary. But, those rebates—or further incentives—often never filter down to the patient at the point-of-sale.
This rule was meant to do exactly that—get money back into the hands of the patient, at the pharmacy counter. Since out-of-pocket costs are, based in part on a drug’s initial list price, cutting-out any “middle-man” rebates that manufacturers have to pay to negotiators—on behalf of health plans, themselves—could translate into upfront savings for the consumer. It could even make drug tiering (prioritizing cost over full formulary access) unnecessary.
Drug companies say the current system forces them to set and keep prices as they are because PBMs who help decide how a drug will be covered by insurance petition high discounts on certain brand name products in order to score “preferential” formulary (and drug tiering) treatment.
But, as the Biden administration continues to work to address the rising costs of health care, there is widespread encouragement among patient advocacy groups to quickly implement the Drug Rebate Rule so that patients can start benefiting from the savings sooner rather than later.