- The Congressional Budget Office has estimated that President Donald Trump's proposal to ban some drug rebates in Medicare would increase federal spending by $177 billion over the next decade. The increase results mostly from a need to increase how much Medicare must subsidize premiums for beneficiaries' prescription drug insurance coverage in Part D.
- Insurance plans use rebates to reduce premiums for all enrollees, and without that revenue premiums will rise at a greater rate, CBO said. The federal government subsidizes close to 75% of the basic beneficiary premium.
- CBO also rejected the idea that drugmakers would reduce list prices, and questioned whether the billing systems established between manufacturers and pharmacies could be upgraded in time to implement the new proposal.
There are seldom any easy answers in healthcare policy. Drug prices, or their burden on patients, will not readily be tamed, based on the CBO's assessment that the administration's signature proposal to ban rebates in Medicare would come with the unintended consequence of raising federal spending.
The claimed problem with rebates, which are exempt from federal anti-kickback laws, is that they help drive up list prices as pharma companies try to counter the tactics used by pharmacy benefit mangers. And, the argument goes, because cost-sharing is based on list prices rather than post-rebate net prices, the discounts don't necessarily help patients paying for drugs.
The main issue with the rebate ban, however, is that Medicare Part D plans will be cut off from a revenue stream. Because rebates have been used to reduce premiums for all, the proposed rule would consequently lead to a rise in premiums and an acceleration in federal spending, the budget forecasters said.
Moreover, the CBO cast doubt on whether eliminating rebates would ease drug price increases. The forecasters said pharma manufacturers probably won't reduce list prices, but instead will seek to replace rebates with a system of discounts to pharmacies through chargebacks. They estimated drug manufacturers would retain 15% of rebate dollars and move 85% into a system of discounts paid out to pharmacies.
In any case, the report casts doubt on whether billing and systems can be updated to accommodate chargebacks in time for the proposed implementation date of the rebate ban, currently Jan. 1.
As for the rebate ban having an effect on the commercially insured population — a claim both the administration and pharma companies have made — CBO offered a definitive rebuttal.
"There would be effects on the larger market only if prescription drug manufacturers changed their list prices, and as discussed above, CBO does not expect them to do so," the report said.