Hospitals, payers decry HHS proposal to change safe harbor for drug rebates
HHS received more than 25,000 comments on its proposal to remove safe harbor protections for rebates that involve prescriptions and create new safe harbor protections for certain point-of-sale reductions in the Medicare Part D and Medicaid managed care programs. Most payers and providers slammed the idea.
Critics of the proposal, including the American Hospital Association and the American Medical Association, said the change won't force drug manufacturers to contain prescription drug costs.
The largest payer lobbying group, America's Health Insurance Plans, argued that the plan will hurt seniors, increase premiums and spending and "create a windfall for pharmaceutical companies."
Fueled by public anger at rising costs for some pricey meds, policymakers across the political spectrum are taking aim at rising drug prices. While big drugmakers are taking some blame, the industry has been successful shifting the spotlight somewhat to pharmacy benefit managers, the middlemen often owned by insurers that negotiate drug prices for employers.
Officials at some of the biggest PBMs, CVS' Caremark, Cigna (which now owns Express Scripts) and UnitedHealthcare's Optum, are set to testify on the topic before the Senate Finance Committee on Tuesday.
The Trump administration plan proposes to do away with certain price reductions offered by drugmakers to pharmacy benefit managers, Part D private insurance plans and Medicaid managed care organizations.
The proposed rule would exclude these rebates from currently provided legal protection under the Anti-Kickback Statute. Instead, the administration's proposal would create new legal safe harbors for discounts given directly to patients paying for drugs at the pharmacy counter, as well as for fixed fee agreements between manufacturers and PBMs.
Commenting on the proposal, AMA Executive Vice President James Madara said the doctors group appreciates efforts to reduce patient drug costs. However, AMA warned the Trump administration to "carefully consider and attempt to mitigate the potential negative consequences" for Medicare and Medicaid beneficiaries.
The Medicare Payment Advisory Commission said the commission backs the plan's objective of containing prescription drug spending, but doesn't think the plan will actually reduce costs. MedPAC Chairman Francis Crosson wrote "the commission has substantial concerns about the proposed changes."
Payers are also concerned about the proposal. Margaret Murray, CEO of the Association for Community Affiliated Plans, wrote that the rebates shouldn't shift to point-of-sale in the Medicaid program. Out-of-pocket costs aren't a problem in Medicaid since beneficiaries pay low or no copays.
The change won't help Medicaid beneficiaries, but may hurt payers and state Medicaid programs, Murray wrote.
"ACAP member plans, their states and their beneficiaries would likely be significantly harmed by the proposed rule because eliminating rebates that Medicaid MCOs negotiate on behalf of states and plans will result in higher costs to both. Many states currently rely on MCOs and their pharmacy benefit managers to negotiate supplemental rebates on MCO drugs. Furthermore, many ACAP Safety Net Health Plans' contracts with pharmacy benefit managers provide for transparent pass-through rebates to the plans," she wrote.
Not everyone is against the proposal. Unsurprisingly, the pharmaceutical industry is on board.
Drugmaker Pfizer spoke in favor, but offered suggestions to "further ensure that financial incentives are aligned to patient care and improve the implementation of the proposed rule."
Those recommendations include extending the changes to the commercial markets, applying the proposed exclusions from the regulatory discount safe harbor to Medicare Part B, exempting value-based arrangements and preventing ownership relationships between pharmacies and PBMs.