Hospitals, payers decry HHS proposal to change safe harbor for drug rebates
- The Department of Health and Human Services has received more than 25,000 comments on the Trump administration's proposal to eliminate safe harbor protections on drug rebates to insurers in Medicare Part D and Medicaid managed care programs.
- Most payers and providers, including the American Hospital Association and the American Medical Association, criticized the plan, saying the change won't force drugmakers to contain prescription drug costs.
- The largest payer lobbying group, America's Health Insurance Plans, argued the proposal will hurt seniors, increase premiums and spending and "create a windfall for pharmaceutical companies."
Fueled by public anger at rising drug costs, policymakers on both sides of the aisle have shown greater interest in recasting how the system works. While pharma companies have drawn substantial scrutiny, the industry has successfully shifted the spotlight onto pharmacy benefit managers as well.
Officials at some of the biggest PBMs, including CVS' Caremark, Cigna (which now owns Express Scripts) and UnitedHealthcare's Optum, are set to testify on the topic before the Senate Finance Committee on Tuesday.
The Trump administration plan proposes to do away with certain price reductions offered by drugmakers to pharmacy benefit managers, Part D private insurance plans and Medicaid managed care organizations.
The proposed rule would exclude these rebates from a currently provided legal protection under the Anti-Kickback Statute. Instead, the administration's proposal would create new legal safe harbors for discounts given directly to patients paying for drugs at the pharmacy counter, as well as for fixed fee agreements between manufacturers and PBMs.
According to actuary estimates, the plan could help to lower out-of-pocket costs for patients prescribed pricier medications. But most would see higher plan premiums as a result.
Commenting on the proposal, AMA Executive Vice President James Madara said the doctors group appreciates efforts to reduce patient drug costs. However, the AMA warned the Trump administration to "carefully consider and attempt to mitigate the potential negative consequences" for Medicare and Medicaid beneficiaries.
The Medicare Payment Advisory Commission, meanwhile, doesn't think the plan will actually reduce costs. MedPAC Chairman Francis Crosson wrote "the commission has substantial concerns about the proposed changes."
Payers are also wary of the proposal. Margaret Murray, CEO of the Association for Community Affiliated Plans, wrote that the rebates shouldn't shift to point-of-sale in the Medicaid program. Out-of-pocket costs aren't a problem in Medicaid since beneficiaries pay low or no copays, she wrote.
Unsurprisingly, drugmakers are on board with the proposal, which fits with the industry's common defense that list prices don't reflect the discounts manufacturers provide.
PhRMA supports the plan and urged HHS to finalize the rule "as expeditiously as possible."
Pfizer also voiced its support, but offered recommendations to broaden the scope of the proposed changes, and to exempt value-based arrangements.
A recent report from STAT indicated a large number of the 25,000 comments appear to come from a write-in campaign led by RetireSafe, a Washington, D.C.-based advocacy group that's received funding from the drug industry in the past,