- The Centers for Medicare and Medicaid Services (CMS) on Thursday proposed changes to how drugmaker rebates are passed on to customers when they buy medicines covered under Part D, a move aimed at lowering out-of-pocket drug costs.
- The regulator notes that rebates and price concessions from manufacturers to payers and pharmacy benefit managers (PBMs) have grown by more than 20% per year from 2010 through 2015. But those savings aren't typically passed on to patients.
- Right now, CMS is only asking for comment on the possible policy approaches it laid out in a much broader proposed rule. If the regulator moves forward, Medicare drug plans could be required to channel savings they extract from drugmakers more directly to customers.
Scrutiny into rising drug prices has brought more attention to how payers and PBMs use the savings they extract from drugmakers in return for favorable coverage or formulary placement. Drugmakers have been quick to accuse PBMs of failing to pass on that money to consumers, arguing that the middlemen are keeping a large cut for themselves.
Whether that argument has merit (PBMs vehemently deny it), federal regulators are paying more attention to the effect those rebates have on the cost consumers pay for drugs.
"In recent years, only a handful of plans have passed through a small share of price concessions to beneficiaries at the point of sale," CMS wrote in its proposal.
While those rebates and concessions may result in lower premium costs for plan members, the agency notes that consumers could still end up paying a larger share of the drug's price than they would if the savings were passed on directly through to the point of sale.
In its request for comment, CMS proposes to require Part D sponsors pass on a minimum percent of a cost-weighted average of rebates provided for covered drugs. The agency is careful to note that this share would be less than 100%.
The mooted changes are also aimed at improving transparency into drug prices — which are notoriously opaque due to the complicated relationship between a drug's wholesale acquisition cost, or list price, and the net price after rebates and discounts are taken into account.
Drugmakers negotiate these concessions with either payers or contracted PBMs in return for favorable coverage, meaning bottom-line cost can vary between commercial plans.
This lack of transparency also affects drugs covered under Medicare Part D. CMS argues that when rebates and price concessions aren't reflected in prices, then consumers can't know the true price of a drug and therefore are unable to effectively shop on price.
Changing how rebates are passed on would likely come with tradeoffs, however. If a plan sponsor has to use negotiated savings to lower drug costs, there would be less money to reduce plan liability and premiums could rise across the board.
CMS believes lowering cost-sharing obligations for drugs would likely offset any increase in premiums. But insurers and PBMs are likely to argue this won't be the case.