White House pulls proposal to eliminate drug rebates

Maricruz Casares
Julio 11, 2019

Drug distributors like McKesson Corp and pharmacy Walgreens Boots Alliance Inc were also trading higher.

The White House first launched the idea of ending the rebates past year as part of a drug pricing "blueprint" aimed at bringing down costs, an important election issue for Trump.

White House spokesman Judd Deere said the rebate proposal was withdrawn "based on careful analysis and thorough consideration".

PhRMA, the main pharmaceutical industry lobby group, disagreed, saying in a statement that the move ended the only government proposal that would have provided immediate savings at the pharmacy counter for patients. A congressional agency's estimate that the plan would have cost taxpayers $177 billion over 10 years seemed to seal its fate.

The about-face represents a second dramatic turn this week for the Trump administration's campaign to rein in rising pharmaceutical costs. And legislators, including House Speaker Nany Pelosi, are pushing for new laws to allow the government to negotiate drug prices directly with manufacturers.

Trump's reversal on rebates was a win for insurers and middlemen called "pharmacy benefit managers" who administer prescription drug plans for large blocks of insured patients.

Azar also said that he and Trump are working on allowing the importation of cheaper drugs from other countries, a move Trump has endorsed but which drugmakers have long opposed. The government's inflation index for medications also includes prices for lower-cost generics, and most consumers are anxious about high-priced brand drugs. Those include "inflation rebates" that drugmakers would be pay directly to Medicare if they raise prices beyond a yet-to-be-determined measure.

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Grassley said in a statement that he had concerns about the administration's rebate rule, but was confident about the prospects for legislation.

Rebates are a largely unseen part of the complex world of drug pricing.

Labor Department data indicate that something different may be happening to drug prices.

The rebate rule would have forced companies like Cigna and CVS to either forgo the discounts or pass them onto Medicare patients enrolled in their health insurance plans and drug plans. On Monday, a federal court ruled the White House could not implement a rule forcing pharmaceutical companies to disclose a drug's list price in television ads. The White House credits Trump for that change, but independent experts say the trend isn't totally clear yet. Instead, they would reimburse pharmacies for discounts provided to individuals as they fill their prescriptions.

"Political momentum was building against the 2020 implementation of the CMS proposal to eliminate pharmaceutical rebates in government programs due to the perceived unintended windfall profits that might have accrued to pharmaceutical manufacturers", JP Morgan analyst Gary Taylor wrote in a research note.

Budget hawks within the administration saw their hand strengthened by the report.

The proposed rule was also expected to raise Medicare premiums, while only saving money for some beneficiaries who spend a lot on medication. Because the government subsidizes about 75% of the premium, that would add $170 billion to program spending from 2020-2029.

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