More on Policy and Legislation

Bill proposes to extend Medicare and Medicaid rebate rule to commercial market

The bill and HHS rule would increase premiums by 25 percent, as insurers use the rebates to lower premiums, AHIP says.

Susan Morse, Managing Editor

Prescription drug prices were under the spotlight again this week as Congress held three hearings on lowering costs and Republican Senator Mike Braun introduced a bill to add commercial plans to a Medicare and managed Medicaid proposal to pass drug rebates directly to consumers rather than pharmacy benefit managers and insurance companies.

America's Health Insurance Plans said the proposed bill and the Department of Health and Human Services rule would increase premiums by 25 percent, as insurers use the rebates to lower premiums.

Senator Braun's bill would extend the HHS rebate rule to the commercial insurance market, and would prohibit pharmacy benefit managers from receiving any rebates or reductions in price from drug manufacturers. The legislation would require that manufacturer rebates or price reductions to be reflected at the point-of-sale.

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Insurers take issue with the proposal and bill saying neither addresses the core problem of high drug costs, which is that drug makers alone set the price, AHIP said. Also, the proposed rule would dramatically change how Part D plans, Medicaid managed care plans, and their contracted PBMs negotiate discounts with drug manufacturers, AHIP said.

Braun also introduced bills to accelerate approval for certain prescription therapies and another on pending generic drug applications to the FDA, both with the intent to reduce prices.

A report released by Pew this week follows the drug money spent and retained in 2016 along the chain of entities in the prescription network.

For net spending, patients contributed $103.8 billion out-of-pocket; employers contributed $497.5 billion towards insurance premiums for drug coverage; and the government funded $139.8 billion for Medicare, Medicare Part D, Medicaid managed care and other programs, the report said.

Health plans, including Medicare Part D and Medicaid managed care, retained $19.6 billion in providing retail prescription drug coverage; PBMs retained $22.4 billion from rebates, fees and spread pricing. Pharmacies retained $76.9 billion through pharmacy, including mail order, specialty and long-term care pharmacies; wholesalers retained $17.6 billion distributing drugs from manufacturers to pharmacies; and manufacturers retained $204.6 billion by producing and selling branded and generic prescription drugs.


This week, the U.S. Senate Special Committee on Aging heard testimony from patients impacted by rising prescription drug prices and discussed policy issues.

The U.S. House Ways & Means Subcommittee on Health and the U.S. House Judiciary Subcommittee on AntiTrust, Commercial and Administrative Law, held hearings on drug pricing and competition in healthcare markets.

Last week, the U.S. Senate Committee on Finance heard testimony from executives of seven big drug manufacturers. Senators wanted a commitment from the CEOs to lower the list price of drugs.

On January 31, HHS proposed removing the safe harbor exemption for pharmacy benefit managers to get rebates from drugmakers, opening the PBMs to anti-kickback laws. Instead the government would establish a new safe harbor for pharmaceutical manufacturers to offer reduced prices on  prescriptions when the rebates are applied at the point-of-sale.


"The pace of activity, with three hearings already held this Congress, and three more to be held this week alone, provides reason for optimism that concrete action will soon follow," said Lauren Aronson, executive director for the Campaign for Sustainable Rx Pricing.

Twitter: @SusanJMorse
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