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UPDATED: Trump-era rebate rule for Medicare Part D on hold until 2023

The parties have been ordered to submit a joint status report identifying whether and how this case should proceed by no later than April 1.

Jeff Lagasse, Associate Editor

Photo by Anna Moneymaker-Pool/Getty ImagesPhoto by Anna Moneymaker-Pool/Getty Images

A rebate rule the Biden Administration had already delayed until March 22 has been pushed out further to January 1, 2023.

The rule, scheduled under the Trump Administration to take effect on January 1, 2022, is being delayed by court order issued January 30, in a lawsuit by the Pharmaceutical Care Management Association against the Department of Health and Human Services.

PCMA is challenging the rule that would replace safe harbor protections for drug rebates in Medicare Part D with discounts for consumers at the pharmacy counter.

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The case is being held in abeyance pending the duration of HHS's review of the November 20, 2020 rule. The parties have been ordered to submit a joint status report identifying whether and how this case should proceed by not later than April 1.

According to a statement from PCMA, the delay in the effective date will give the Biden Administration the necessary time to review the entire rebate rule's impact on Medicare Part D and its enrollees. 

WHAT'S THE IMPACT?

The Trump rule received pushback when it was first announced, with opponents claiming the move would not lower drug prices, and instead would increase costs for all beneficiaries, with insurers using the rebates to lower premiums.

"Drug prices are out of control because Big Pharma alone sets and controls drug prices, not because health insurance providers and our PBM partners negotiate discounts and rebates to reduce drug prices," said Matt Eyles, president and CEO of America's Health Insurance Plans in November.

"While pharma manufacturers would have you believe rebates are a problem and have pushed the Administration's 'rebate rule,' time and time again, economists and analysts have found that the rule takes us in the wrong direction by increasing costs and premiums."

In February 2019, HHS actuaries said the rule would increase Medicare premiums for all seniors by 25%, said Eyles, adding that the rule would give drugmakers another $100 billion bailout and have taxpayers foot the bill for higher costs.

The announcement that the Biden Administration would delay the rule garnered positive feedback from the Campaign for Sustainable Rx Pricing (CSRxP), which issued a statement lauding the decision. 

"CSRxP applauds the Biden administration's decision to delay this misguided pharma-backed proposal to protect America's seniors and taxpayers," said CSRxP executive director Lauren Aronson. "We commend the administration for seeing through Big Pharma's blame game and making the right call to delay this misguided policy, which would do nothing to lower drug prices, while also increasing premiums on Medicare Part D beneficiaries, costing taxpayers more than $200 billion and handing drug companies a more than $100 billion bailout.

"We are also pleased to see the Government Accountability Office (GAO) agree the Rebate Rule was issued in violation of a legally required process for public input," he said. "CSRxP looks forward to working with the administration and lawmakers to permanently reverse implementation of this disastrous policy and focus drug pricing efforts instead on market-based solutions to increase transparency, boost competition and hold Big Pharma accountable."

THE LARGER TREND

A January 20 memo from White House Chief of Staff Ronald Klain said all rules or agency actions that didn't take effect prior to noon that day – when Joe Biden was officially sworn in as president – will be subject to review by the new administration before they can take effect.

If the previous administration's actions raise questions of "fact, law or policy," the officials now leading the agencies can further delay effective dates and consult with the Office of Management and Budget about other actions, and can also open comment periods on those actions.

If there are no such questions, no actions are needed, and the rule, guidance or proposal can be considered active and effective. Regulatory pauses of this nature are common among incoming presidents as they ensure that the unfinished policies from the previous administration align with their views.

If the Trump rebate rule had been allowed to go into effect as scheduled, the Department of Health and Human Services would have effectively eliminated protections allowing pharmacy benefit managers to pass along Medicare Part D rebates to insurers. The rule excluded safe harbor protections under the Anti-Kickback Statute for rebates paid by drug manufacturers to PBMs, instead creating new safe harbor protections for these rebates to be passed directly to consumers at the pharmacy counter.

Then-HHS Secretary Alex Azar said at the time that the rule would create incentives to lower list prices and reduce out-of-pocket spending on prescription drugs. Savings to patients were estimated to be nearly 30%, the average difference between the list price of a drug and the net price after a rebate.

Patient out-of-pocket spending is usually based on the drug's list price and does not take into account rebates to plans. Rebates typically do not affect the price, which means in some cases a patient's cost sharing can be higher than the net price paid by the health plan after rebates.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com