- The drug, pharmacy benefit managers and insurance industries are all weighing in on a CMS proposal to require Part D sponsors to pass on a percentage of rebates to consumers, an effort to lower out-of-pocket drug costs.
- Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Stephen Ubl praised the idea, saying that sharing such savings would “benefit millions of seniors, strengthen the program’s competitive incentives and generate significant government savings.”
- But America's Health Insurance Plans (AHIP) and the Pharmaceutical Care Management Association (PCMA) disagree, writing in comments to CMS that the proposal would actually raise costs for most Medicare beneficiaries. The insurer group argues the proposal fails to address the root problem of excessive list prices and price increases for drugs. PCMA also contends CMS does not have the legal authority to implement the proposed policies.
The proposal would change how drugmaker rebates are passed onto consumers buying medicine under Part D by requiring sponsors to pass on a minimum percent of a cost-weighted average of rebates to consumers. CMS issued a request for information (RFI) to gather comments on the idea as part of a larger proposed rule in November, noting the widening disparity between gross Part D drug costs and costs net of direct or indirect remuneration (DIR). That latter is a measure that include rebates provided by drugmakers to insurers.
The Medicare Payment Advisory Commission commented that it shares CMS’ concern that sponsors have weak incentives to offer lower prices to consumers at the point of sale and may instead seek to offer highly-rebated drugs over cheaper alternatives.
However, the commission warned that policies that shift DIR to lower point of sale prices rather than to push down premiums would increase Medicare’s costs. MedPAC strongly encouraged CMS to examine other policies such as requiring sponsors share a portion of expected DIR in cost sharing amounts when bidding.
“We are concerned that CMS’s proposed approach would be complex to implement, administratively burdensome and, for drug classes with few competing therapies, would risk disclosure of confidential rebate information. Further, the policy would not help beneficiaries who take expensive drugs with no post-sale rebates or discounts,” MedPAC Chairman Francis Crosson wrote.
PCMA argues that the true beneficiary of the proposal would be drug companies, pointing to CMS estimates in the RFI.
“[R]equiring 100 percent of rebates to be passed through at POS would, over the next 10 years, increase government costs by $82.1 billion; increase beneficiary premiums by $28.3 billion (an 11 percent increase); and provide a windfall to drug manufacturers of $29.4 billion,” wrote PCMA President and CEO Mark Merritt.
But PhRMA disagrees the government would lose out, pointing to a report Milliman prepared for the trade group. The report estimates that a rebate pass through policy could create net savings from $8 to $73 billion over 10 years for the federal government once you take into account behavioral changes.
In its comment, PhRMA pointed to individuals with deductibles or coinsurance as a group facing high out-of-pocket that would benefit from the policy.
But Matthew Eyles, AHIP SVP & COO, wrote in the group’s comment that this view ignores the underlying problem of high list prices for drugs that are set by drugmakers.
“Contrary to CMS’s bigger goal, the agency’s proposal in the RFI would in fact raise costs for most Medicare beneficiaries. With nearly 90 percent of Part D prescriptions filled by generic drugs and only a portion of branded drug manufacturers offering rebates, CMS’s proposal would benefit only a small minority of beneficiaries,” Eyles wrote.
PCMA also argues that the proposal may not pass legal muster, saying it would “violate at least four separate provisions of the Part D statute as well as the Trade Secrets Act” and could potentially raise concerns under the Administrative Procedure Act depending how CMS proceeds with rulemaking. But PhRMA writes “CMS has clear statutory authority” to establish a point-of-sale rebate policy with a minimum pass through requirement.
CVS Health, in talks to merge with insurer Aetna, in its comment, goes a step further. "The policy in the RFI is a solution in search of a problem. There is not a problem of plans retaining rebates as profits, because the problem does not exist," wrote Don Dempsey, CVS Health vice president policy and regulatory affairs.