The Administration's proposal to eliminate pharmacy benefit manager (PBM) rebates in Medicare would be one of the most expensive regulations ever issued by the U.S. Government -- costing taxpayers $177 billion over ten years (Congressional Budget Office).

Proposed Rule

Pharmacy benefit managers (PBMs) have been advocates for reducing consumer prescription drug costs for decades. On average, PBMs reduce drug prices by 30%, or approximately $941 dollars per patient. Much of these discounts come from PBM-negotiated rebates.

A recent proposal by the U.S. Department of Health and Human Services recommends removing "the long-standing safe harbor protection for drug manufacturer rebates to PBMs," which would essentially eliminate PBM-negotiated rebates. This is not a well-considered option.

The proposal could increase Medicare Part D premiums up to 25%, cost taxpayers $177 billion (according to Congressional Budget Office) and hand a $40 billion windfall in profits to drugmakers.

Medicare's prescription drug benefit has succeeded in providing affordable access to medications for Medicare beneficiaries because of the rebates PBMs negotiate with drugmakers. These rebates are used to enhance benefits and reduce beneficiary cost-sharing and premiums. Part D premiums have remained lower than initially projected since the program began and enrollees are highly satisfied with their prescription drug coverage.