- Pharma, which used to cite the high cost of research, now say rebates within supply chain drive up prices.
- Pharma says they don’t actually benefit much from list-price increases and that their net prices are suffering, because they are paying bigger rebates to pharmacy-benefit managers that negotiate prices in secret with their clients, such as employers and labor unions.
- Drugmakers’ price increases are unrelated to the rebates, according to research commissioned by the Pharmaceutical Care Management Association, a trade group for PBMs.
When proxies for the pharma industry are cheering a policy on, as they are in this case, it’s a sign that this isn’t a simple win. Every health-care policy comes with trade-offs, and this one is no exception.
The government plan would end the exemption from anti-kickback rules that enables the current rebate system. Instead, it will only allow rebates that are fully passed on to consumers. It would also prohibit deals between PBMs and drugmakers that are based on sales volume in favor of fixed-fee arrangements.
The administration’s proposal is focused on lowering out-of-pocket spending but that is a pure charade. Premiums would jump because those big rebate checks will evaporate, offsetting some of the savings. Also, the lower drug costs would disproportionately flow to beneficiaries that spend a lot on heavily rebated medicines in competitive classes. So their savings would come, at least in part, at the expense of those that don’t. There will likely be plenty of other unforeseen consequences.
The impact for consumers would not be immediate since the changes would take effect over the next year if all goes according to plan. Also, drugmakers do not currently provide discounts for all their medications.
“Experience tells us that merely trusting Big Pharma to lower its drug prices for consumers is not a solution, it’s a prescription for more of the same” said Nancy Pelosi.
Of course, Insurers and middlemen like CVS and Express Scripts opposed the plan, saying that the discounts from drugmakers are used to keep premiums lower for everybody.
The Best Way to Lower Drug Prices: End the Medicaid Program that Blocks Discounts
According to Fortune “the system is indeed broken, but the Administration is ignoring the right prescription. The principal reason that it’s so tough to drive down drug costs is a mostly-overlooked, blatantly anticompetitive regulation that blocks private purchasers from securing the super-deep discounts they’d be garnering in an open market. The barrier is known as the “Medicaid Best Price” policy. In effect, it puts a concrete floor under prices offered to the private plans that purchase over 40% of America’s prescription drugs. The HHS release advertises itself as a daring manifesto for taming drug prices, yet makes no mention of this competition-killer.
It’s important to understand that the new rules are primarily aimed at Medicare Part D, the program that accounts for around 30% of the $500 billion the U.S. spent on drugs in 2018. The measure wouldn’t outlaw rebates to PBMs managing private plans. It also leaves the Medicaid Best Price policy precisely in its current form. The 123 page full text of the proposed regulation states, that “the proposed rule would not alter obligations for Medicaid prescription drug rebates…including provisions related to the best price.”
I’m suspicious of any changes to drug pricing that is supported by pharma and their lobbying arm PhRMA. We need to erase the board and start from square one when it comes to ALL healthcare pricing. As long as pharma is reporting strong healthy and growing profits forgive me if I don’t feel their pain.