More on Medicare & Medicaid

CMS is expected to release new rebate rule soon

Better Medicare Alliance said the rule threatens to raise seniors' health costs amid a global pandemic.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services is expected to release a final rule soon on drug rebates after a flip-flopping 19-month run.

This is based on a Nov. 13 confirmed final rule from the Office of Management and Budget, referring to three versions going back to 2018 and 2019.
The final rule, expected to be based on a proposal CMS released in February 2019, would end the current drug rebate program, in which pharmacy benefit managers pass on manufacturer rebates to health plans, which then use the funds to discount premium prices for all members.

Better Medicare Alliance, an advocacy organization, is against the rebate rule, saying it would eliminate current cost-saving prescription drug rebates for seniors in Medicare Part D plans, including the more than 22 million beneficiaries enrolled in Medicare Advantage-Prescription Drug plans.

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The Trump administration's actuaries found that such policies could raise Medicare Part D premiums by 19% in the first year and 25% in the decade thereafter, Better Medicare Alliance said. Medicare Advantage plans with $0 premiums, for example, would see a 28% decrease in the funds available to provide supplemental benefits to enrollees.


Lowering the cost of prescription drugs has had bipartisan support, but stakeholders have differing views on the best method to achieve lower prices, depending upon the organization they believe is responsible for high drug prices in the first place.

Insurers and pharmacy benefit managers have long said it's the drug manufacturers that set the prices. Independent pharmacists put the blame on pharmacy benefit managers.

In February 2019, the Department of Health and Human Services released a proposed rule targeting pharmacy benefit managers by proposing to remove anti-kickback protections called safe harbor from rebates paid to PBMs. Instead the rule would create a new safe harbor for discounts offered to consumers directly at the pharmacy counter.

Health and Human Services Secretary Alex Azar, a former pharmaceutical executive, said at the time that the proposed rule was to "replace backdoor rebates with upfront discounts at the pharmacy counter." The rebate system had created a perverse incentive to increase list prices to get higher rebates, he said.

But insurers said the PBMs pass on the rebates to commercial plans, which then use the funds to lower costs for all consumers, and not just for those buying drugs.


In July 2019, the Trump Administration withdrew the rebate rule. A year later this July, President Trump issued an executive order effectively reviving the proposed rule. 

This new "Rebate Rule 2.0" may be modified from its original version, Better Medicare Alliance said.

Stakeholders are now waiting to see what the final rule will entail.


"It would be deeply unfortunate to see CMS risk undermining its own progress in lowering healthcare costs for seniors in the final weeks of the current administration with finalization of this ill-conceived rule," said Allyson Y. Schwartz, president and CEO of the Better Medicare Alliance. "CMS has touted its work to keep Part D premiums low, yet its own actuaries say this rule could raise Part D premiums by 19% in the first year alone – adding a senseless cost burden on seniors at the height of the COVID-19 pandemic."

Twitter: @SusanJMorse
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