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Democrats, America's Health Insurance Plans denounce HHS plan targeting drug rebates

Community Oncology Alliance commends proposal to overhaul what it calls secretive drug rebate system that drives list prices higher.

Susan Morse, Senior Editor

Democrats have condemned the Trump Administration's proposal to lower prescription drug prices by giving manufacturers incentive to stop the current practice of giving insurers rebates that are used to lower premiums.

Pharmacy benefit managers and Part D plans negotiate rebates as a percentage of the list price.

Instead, the Department of Health and Human Services wants the rebate discounts to be passed on directly to consumers. Consumer premiums could increase 3-5 percent under the proposed rule, HHS said, but out-of-pocket costs would be dramatically reduced.

House Speaker Nancy Pelosi said the rule relies on trusting big pharma to lower its drug prices.

"Under the Trump Administration's proposal, Big Pharma could see even bigger profits and even less restraint on what they charge seniors," Pelosi said by statement, calling on President Trump to  work with Congress on legislation to drive down the price of prescription drugs.

Ways & Means Committee Chairman Richard Neal and Energy and Commerce Committee Chairman Frank Pallone, Jr., both Democrats, said, "The Trump Administration's rebate proposal will increase government spending by nearly $200 billion and the majority of Medicare beneficiaries will see their premiums and total out-of-pocket costs increase if this proposal is finalized."

America's Health Insurance Plans came out against the proposed rule in which HHS Secretary Alex Azar likened rebates to insurers, "kickbacks to middlemen."

"Big Pharma has been working nonstop to deflect attention from outrageously high prices by convincing Americans that health insurance providers and their PBM partners are the problem, acting as so-called 'middlemen,'" said AHIP President and CEO Matt Eyles.  "We are not middlemen – we are your bargaining power, working hard to negotiate lower prices with drug makers to save seniors and other patients about 50 percent a year on their prescription drug and related medical costs. If not for health insurance providers and PBMs, drug prices and costs would be far higher. Projections show that over the next decade, we will save consumers and taxpayers more than $650 billion on drug benefit costs."

The proposed rule would dramatically weaken the ability of health insurance providers and their pharmacy benefit managers to negotiate lower drug prices, Eyles said.

"We cannot achieve those savings if our leverage and negotiating power is weakened through well-intentioned but misguided actions like this proposed rule," he said. "From the start, the focus on rebates has been a distraction from the real issue – the problem is the price. Manufacturers have complete control over how drug prices are set."
However, provider organization Community Oncology Alliance commended the proposal that it said would "overhaul the nation's secretive drug rebate system" that has served to drive drug list prices higher."

Nearly every drug company taking a January 2019 price increase announced that all or nearly all of the increase was being paid to PBMs or insurers as rebates, COA said.

"For decades, corporate PBM middlemen have pocketed billions of dollars in record profits from the shadowy network of rebates they negotiate with manufacturers, while patients with cancer and other serious diseases have continued to bear the burden of high drug costs," COA said.

COA also encouraged the Administration to next fix direct and indirect remuneration fees – DIR fees – that PBMs get from pharmacy providers and that further drive up list prices of drugs. 


Everyone agrees that the cost for prescription drugs must be addressed.  The disagreement is over how this should be done. Most point blame at the manufacturers.


Prescription drugs are seen as one of the largest contributors to rising healthcare costs. In 1980, such spending totaled around $12 billion and accounted for about 5 percent of total healthcare costs, according to By 2016, prescription drugs accounted for 10 percent of healthcare costs, or about $330 billion, and that amount is projected to nearly double within the next decade. 

Retail drug spending is around 10 percent of total healthcare spending, but total drug spending was 16.7 percent (or $457 billion) in 2015, according to the American Hospital Association. The Medicare Payment Advisory Commission has found that 19 percent of all Medicare spending is for drugs, and state Medicaid directors identify the high cost of pharmaceuticals, including specialty drugs, as putting growing pressure on their budgets, the AHA said.

Twitter: @SusanJMorse

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