Administration’s radical actions on drug pricing

By Albert DiPiero MD, MPH

Everyone is going after a common enemy these days: Big Pharma and high drug prices. The House and Senate have both stated that the days of unrelenting increases in drug prices are numbered. But it is the Trump administration that continues to make the moves in healthcare. The administration has proposed and implement a series of rules that I believe are underestimated in their radicalness and far reaching effects (see previous postings on requirements for posting hospital price lists). Here is another potential game changer. Rather than going at the drug makers directly, (thought that may come soon), the administration is proposing limiting the rebates that drug makers give to the PBM middlemen in Medicare and Medicaid and directing those rebates to patients. These rebates are essentially legalized kickbacks. But that is about to change. By going after the hidden underbelly of the drug-pricing chain, the administration is taking on powerful adversary. Here are key quotes:

“The effort could disrupt the U.S. pharmaceutical industry. Under the current system, pharmacy-benefit managers, or PBMs, negotiate confidential rebates and discounts on many branded prescription drugs. Those deals aren’t always passed along to customers at pharmacies.”

“Rebates between Medicare plans and drug manufacturers have long been permitted because they aren’t barred under statutes prohibiting kickbacks to secure federal business. The new proposal could eliminate that protection by potentially subjecting the rebates to review under anti-kickback statutes.”

And the pharmaceutical companies may be supportive of this proposal!

“Drugmakers complain that they have significantly increased the rebates they pay to PBMs, but that the money doesn’t appear to flow through to consumers in the form of lower copays and deductibles.”

They key will be whether this leads lower prices and out-of-pocket expenses for the end user, ie the patient. There are counter arguments that the proposal will increasing premiums or that the lower prices will flow to a small number of patients. But I say better than nothing.

Read WSJ: Trump Administration Moves to Curb Drug Rebates in Medicare, Medicaid

Read KHN: Congress Wades Into Emotional Debate Over High-Cost Prescription Drugs

Read NYT: On Both Ends of Capitol, Both Parties Warn Big Pharma on Drug Prices

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