White House kills rebate rule aimed at lowering drug prices

President Trump									Win McNamee  Getty Images

The withdrawal of the plan is expected to put pressure on administration officials to pursue more populist proposals, from importing lower-cost drugs from other countries to basing the prices of some Medicare drugs on the lower prices paid by other countries - ideas favored by the president but reviled by the drug industry and many Republicans.

The end of the rebate push is likely to swing discussion back toward the pricing practices of big drugmakers, and it could add momentum to other proposals that have been floated by the administration, such as tying drug costs to an index of worldwide pharmaceutical prices.

The rebate rule would have forced companies either to forgo the discounts or pass them onto patients enrolled in their health insurance plans and drug plans. Drugmakers preferred the consumer rebate approach to other ideas that lawmakers are considering.

The rebate rule served as a centerpiece for the president's plan to reduce drug prices, and would've deprived PBMs of a crucial portion of their overall revenue stream.

The plan from Health and Human Services Secretary Alex Azar was once highly promoted, but ran into opposition within the White House.

"Even by their estimates, the Medicare-for-all government takeover of health care would cost $32 trillion over the next 10 years", he said.

Braun disputed the CBO figure.

"For the average consumer, it wouldn't have affected list prices or pharmacy costs at the counter unless you were a Medicare beneficiary or using certain drugs", he said.

"Based on careful analysis and thorough consideration, the president has made a decision to withdraw the rebate rule".

"The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people", he said.

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A senior administration official, speaking on condition of anonymity, told Reuters the rule was too costly and would have hurt chances for bipartisan legislation.

They argued that such a change would force them to raise monthly premiums and had been pressing the administration to consider its impact on Medicare, which includes people aged 65 and older and the disabled, and instead focus on drugmakers.

Rebates are a largely unseen part of the complex world of drug pricing. Rebates are a big business for PBMs such as Cigna-owned Express Scripts, CVS Health's Caremark business, and UnitedHealth Group-owned OptumRx.

It was a defeat for the pharmaceutical industry, which had lobbied to promote rebates.

HHS previously said that the rule would counteract incentives behind higher list prices; now, when a list price rises, patients who pay a percentage or all of the list price for a drug see their out-of-pocket expenses increase while PBMs reap financial rewards.

But congressional analysts concluded that drug companies were unlikely to lower list prices across the board in response to the plan.

Labor Department data indicate that changes may be afoot with drug prices.

"There are still many headwinds for the supply chain", he said, adding that "pharma and biotech seem to have drawn the ire of the administration more recently".

But without insurers getting the rebates, the bottom line would have been an increase in premiums. Here's what the White House and health policy experts are saying about the significance.

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