The Trump administration and Congress are pushing forward with several new ideas to help lower drug costs for consumers. America’s pharmacy benefit managers (PBMs) have the expertise, tools, and unique capabilities to help enact these solutions, and ensure prescription drugs are accessible and affordable. As the head of the trade association representing PBMs, I know that PBMs are not always well understood. PBMs are an important link in the drug supply and payment chain that includes manufacturers, wholesalers, physicians, pharmacies and Pharmacy Service Administrative Organizations, all working to get therapies to patients. Within that chain, PBMs are the only organizations whose mission is to control drug costs through tools that encourage competition among drug manufacturers, and incentivize consumers to take the most cost-effective, clinically appropriate medications.
5/20/2019 (Axios Vitals Newsletter)
The Trump administration's proposal to shake up how money moves through the prescription drug supply chain in Medicare works best if it's also extended to the commercial market, supporters say. Yes, but: The politics of the proposal will almost certainly prevent this from happening. Opponents say the change is a handout to pharmaceutical companies and would increase premiums... [and]... The independent Congressional Budget Office estimated that the administration's proposal — which is limited to Part D — would cost the federal government $177 billion over 10 years, an eye-popping price tag that is giving members of Congress pause.
The high price of prescription drugs is one of the most vexing public policy issues in Washington, and the Trump administration should be commended for its focus on this real but frustrating challenge. Yet the CBO report should be proof enough that the proposed HHS rule, which would prohibit pharmacy benefit managers from receiving rebates from manufacturers on prescription drugs, is not the answer the nation needs. This proposal merely shifts costs among consumers while likely granting a financial boon to drug manufacturers. The administration should scrap this proposed rule and instead concentrate on policies that lower the cost of drugs for all Americans.
Medicare spending would climb by $187 billion and Medicaid by $7 billion over the next decade if the CMS finalizes a rule to get rid of the safe harbor for rebates for Part D drugs, according to an analysis from the Congressional Budget Office... The CBO, the official congressional scorekeeper, predicted that the increase in Medicare spending will occur via an increase in premiums for Part D plans, which would rise if the rebates are not there to reduce premiums... "Because the government subsidizes 74.5% of the basic beneficiary premium, higher premiums would lead to larger federal subsidies, thus increasing federal spending," the CBO said.
5/03/19 (Axios Vitals Newsletter)
A new analysis from the Congressional Budget Office reiterates the major concerns about the Trump administration’s drug rebate rule — that it could be a budget-buster and a gift to pharmaceutical companies, Bob writes. By the numbers: CBO estimates the regulation would raise federal spending by $177 billion over the next decade because health insurers and pharmacy benefit managers would raise premiums to offset the loss of rebates — similar to what actuaries at the Centers for Medicare & Medicaid Services have projected.
April 30, 2019 (requires subscription to InsideHealthPolicy)
Conservative lawmakers, media, think tanks and pundits are split on the Trump administration’s proposed rule that would shift Medicare drug rebates to the point of sale. While some are lining up behind the Trump plan, others are hesitant to do so because the rule likely would raise premiums for seniors, increase taxpayer spending and be a windfall for unpopular drug makers.
April 30, 2019
Seniors benefit from the PBM-negotiated discounts on drugs with lower out-of-pocket costs, and removing that benefit will leave them with unsustainable financial pressure. According to federal analysis, Medicare Part D premiums will increase by 25% as a result of this rule. Additionally, the administration admits this would increase federal spending by $196 billion from 2020–29. It does not make sense to bill taxpayers $200 billion to fund a rule that raises Medicare premiums.
4/29/19 (requires subscription to InsideHealthPolicy)
Congressional Democrats and Republicans are considering delaying the Trump administration's proposed ban of point-of-sale rebates and using savings from the delay to pay for other legislative priorities, sources said. A drug industry consultant said the savings are likely being eyed as an offset for capping seniors' annual spending in Medicare Part D... HHS proposed to ban drug rebates in Medicare and Medicaid managed care, starting next year, and the administration is widely expected to follow through on that plan. The CMS Office of the Actuary estimated that the proposed rebate reform rule would cost federal taxpayers $13.4 billion in 2020, and more than $196 billion from 2020-2029, so lawmakers suspect that delaying the rule might score significant savings.
4/28/19 (requires subscription to Pink Sheet)
The Pharmaceutical Care Management Association maintained “the findings in the 2019 Medicare Trustees report confirm that one important way pharmacy benefit managers are controlling Medicare Part D drug costs is through negotiations with drug makers for price concessions, or rebates.” The group added it is “concerned that the Administration’s proposed rule … will cause disruption to the Part D benefit and the drug supply chain should PBMs’ ability to effectively negotiate and facilitate price concessions be diminished. Nevertheless, PCMA added that if HHS moves ahead with implementation, “PBMs have the infrastructure, tools, and data to best operationalize a restructured system.”
4/25/2019 (tiered subscription Reno Gazette Journal may be required)
The proposed rule hurts American seniors and people with disabilities, particularly those living on fixed incomes. According to the administration’s own analysts at the Centers for Medicare and Medicaid Services (CMS), Medicare Part D premiums will increase by 25 percent overall and 19 percent in 2020 alone. This would be the biggest increase in history and would create a financial burden that seniors simply cannot bear.
4/22/2019 (requires subscription to Pink Sheet)
"... should HHS feel compelled to finalize any changes to the safe harbor treatment of rebates effective January 2020, the only way that such a policy has a chance of being implemented under this short timeframe would be to rely on existing infrastructure and systems already in place and operated by PBMs, as subcontractors to Part D plans," PBM trade group the Pharmaceutical Care Management Association said.
While the administration avers that ending rebates will lower drug prices for Medicare enrollees, this amounts to wishful thinking, and its rationale conflates cause and effect. Rebates are presently the only viable tool for purchasers to rein in drug costs, and eliminating them will ultimately cost the government and seniors.
But Big Pharma – the beer companies in our scenario -- will realize a windfall of up $100 billion per year, according to one study, and ticket prices – what Part D participants pay in premiums and taxpayers shell out for Medicare and Medicaid – would go up... According to a study performed for America’s Health Insurance Plans, an industry trade group, participants would pay $85.7 billion more per year in premiums and the government would pay $410 billion more for drugs for Medicaid patients. Premiums for seniors could rise as much as 50 percent, and premiums for Part D participants could climb 25 percent
The trade group also takes issue with the proposal’s attempt to set up a system in which “a yet-to-be-determined third-party administers chargebacks within some newly created infrastructure.” PCMA says such a process would be “long, costly, and complicated” and duplicate some of the work PBMs are already doing. Instead, it suggests that PBMs themselves should administer point-of-sale price concessions using the infrastructure that already exists.
Research backed by the Pharmaceutical Care Management Association and America's Essential Health Plans supports these claims. A study commissioned by PCMA projects that the rule would increase Medicare spending by $200 billion by 2029, while estimates from Avalere Health on behalf of AHIP estimate that Medicare Part D premiums for seniors could rise by as much as 40%.
"... limiting the ability of Part D plan sponsors and their PBMs to use rebates could also lead to uncertain and potentially undesirable outcomes, and thus the Commission has substantial concerns about the proposed changes."
Trump has proposed eliminating drug-pricing rebates in Medicare Part D, beginning in 2020. But Medicare and Medicaid administrator Seema Verma said in a memo today that insurers and pharmacy benefit managers can assume rebates will still exist as they design their 2020 plans.
The proposal is unlikely to reduce drug prices; indeed, it is more likely to increase drug prices. The CMS OACT model estimates that manufacturers will reduce their total discounts by 15 percent when switching from a rebate to a pharmacy discount;9 based on CMS OACT’s estimated current 24 percent rebate, this correlates to a 5 percent increase in net drug prices for the Medicare Part D program. In addition, the proposal could lead to a circumstance that the Federal Trade Commission (FTC) has identified as a risk for anticompetitive behavior by manufacturers that would increase prices.
3/25/2019 (Politico Prescription Pulse - week of March 25)
Some believe that Democrats in Congress may be working to put on the brakes. "We continue to hear that House Democrats are interested in delaying the HHS/OIG rebate rule," Kim Monk of Capital Alpha Partners wrote in a note to clients. Some drug industry lobbyists told POLITICO the same.
3/21/2019 (requires subscription to STAT News)
RetireSafe, a Washington-based advocacy group with ties to the drug industry, appears to be behind a deluge of comments on HHS' controversial proposal to end the current system of rebates used to negotiate the price of drugs.
Senior registered voters enrolled in Medicare Part D will be less likely to support the reelection of their members of Congress and presidential candidates if those elected officials back proposals eliminating prescription drug negotiations and price concessions that would result in Part D premium increases, according to a new poll from North Star Opinion Research released by the Pharmaceutical Care Management Association (PCMA)... "This poll shows that seniors are highly satisfied with Medicare Part D and their own plans,” said PCMA President and CEO JC Scott.
03/18/2019 (Politico Prescription Pulse)
"The federal government’s own expert analysis has shown that the proposed rule would raise premiums on America’s seniors by 25 percent, while increasing taxpayer costs by nearly $200 billion over 10 years," AHIP spokesperson Kristine Grow said. "While well intentioned, the proposed rule would only take away an important tool for negotiating lower costs for Americans, without replacing it with a new one. Nothing in the rule requires, or even incentivizes, big pharma to lower their drug prices."
3/14/2019 (requires subscription to Pink Sheet)
Azar acknowledged the uncertainty about the market response to the proposal. Nevertheless, he expressed confidence that his instincts about a favorable outcome are correct. His support for the policy may not have been shared by everyone in the administration, based on the length of time the proposed rule remained under review at the Office of Management and Budget before release. "Actuaries can add and do math but they're not really good at predicting human behavior, or especially what companies do in an economic system," Azar said. The estimates about the proposal's impact "ranged from up to $100bn in savings to $200bn in costs - that's a $300bn wide margin."
3/14/2019 (requires subscription to InsideHealthPolicy)
Pallone also reiterated his disdain for the Trump administration's proposed rule requiring rebates to be passed to consumers in Medicare Part D and Medicaid managed care, saying it would not do much to reduce costs because drug makers would have to voluntarily lower list prices
“The whole middle man debate that big pharma continues to drive is nothing more than a distraction and finger pointing to blame everybody about their high drug prices but themselves," said Kristine Grow, a spokesperson for America’s Health Insurance Plans. “There is no visibility into how they set those prices or what causes them to go up." “Drug makers alone have the power to set prices. They do this unrelated to the rebates they negotiate with [pharmacy benefit managers]," said JC Scott, president and CEO of the Pharmaceutical Care Management Association, the trade group for PBMs.
Prescription drug list prices in the United States continue to be a source of frustration for patients and policymakers alike. The administration is pushing forward with new ideas for lower list prices and lower costs for consumers. As the only entity in the prescription drug supply chain whose mission is to lower costs, America’s pharmacy benefit managers support that objective.
A new proposed federal rule removes safe harbor protections under the federal anti-kickback statute for rebates paid by drug manufacturers to PBMs, Medicare Part D plans, and Medicaid managed care organizations... America’s Health Insurance Plans has accused the Department of Health and Human Services of laying blame for the health system’s current high prices at the feet of insurance provider’s and their PBM partners and deflecting attention away from the price setting practices of drugmakers. CVS blames drugmakers for high drug costs, stating that while PBMs have become a convenient target, the reality is that they serve as a last line of defense for the consumer.
3/4/2019 (White Paper by Foley Hoag, LLP)
... as the Administration considers policies that rely in whole or in part on upfront discounts, it must carefully consider how current antitrust laws may prevent or deter discounts that are at least as large as the discounts in today’s drug supply chain. Absent such careful consideration, including revisions to existing antitrust laws by Congress that have the current practical and legal effect of limiting and/or reducing the amount of upfront discounts offered by manufacturers, any efforts to modify the current rebate system may result in increased net drug prices, in contravention of the goals of the Administration and the Proposed Rule.
The fourth item in the second proposed rule is probably the most controversial, as it involves the rebates that drug plans and PBMs receive from drug manufacturers... The Pharmaceutical Care Management Association (PCMA), which represents PBMs, supports the current rebate system. While it has not publicly opposed the change to the “negotiated price” definition, PCMA appears to oppose it. President and CEO JC Scott defends the current system, saying, “These competitive negotiations generate significant savings for the federal government and beneficiaries, while also encouraging pharmacies to meet contractual ‘pay-for-performance’ standards based on quality measures such as generic dispensing rates.”
North Star Opinion Research fielded a national live-caller telephone survey of 800 senior registered voters who are enrolled in Medicare Part D on February 20-25, 2019. Highlights of the results are:
"We agree that drug company list prices must be addressed, and that more can be done to increase access and affordability. Unfortunately, this new proposal will not lead to lower prescription drug prices, but could have severe unintended consequences such as destabilizing the Medicare Part D program at a significant cost to taxpayers," said JC Scott, PCMA president and chief executive officer, in a statement. "We should focus on solutions that protect the important role of negotiations and the savings that are critical to keeping down consumer costs, including premiums."
2/28/2019 (requires subscription to InsideHealthPolicy)
The House Ways & Means health subcommittee will hold a hearing on promoting competition to lower prescription drug prices in Medicare on March 7, chair Rep. Lloyd Doggett (D-TX) announced Thursday (Feb. 28). The committee is the latest to join the congressional dogpile of hearings on the issue, including a two-day Senate Special Committee on Aging hearing, of which the second session will be held on the same day.
JC Scott, president and CEO of Pharmaceutical Care Management Association, for instance, said recently that his group is concerned that "eliminating the long-standing safe harbor protection for drug manufacturer rebates to PBMs would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries."
A PCMA spokesman said the work is a new and separate advocacy campaign that aims "to protect the savings PBMs generate for Medicare and Medicaid beneficiaries." One of the print ads depicts a group of senior citizens talking, and it includes a direct question to lawmakers at the bottom: "Are you sure this is a good idea?"
The big drug companies and an army of lobbyists have been working nonstop to deflect attention from outrageously high prices. But in reality, insurance providers and Pharmacy benefit managers (PBMs) are the only 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.
Trump's drug price plan mixed bag for benefit managers
"I think the rhetoric is overblown. It's overblown and unfair," JC Scott, CEO of the PBM industry's trade group Pharmaceutical Care Management Association, told Fox Business. "HHS clearly recognizes the importance of having an entity like the companies that we represent."
Finance Democrats Question HHS Rebate Plan During Visit With Azar
2/13/2019 (requires subscription to InsideHealthPolicy)
In an in-person meeting, Senate Finance Committee Democrats on Wednesday (Feb. 13) asked HHS Secretary Alex Azar how the administration plans to eliminate Medicare Part D rebates without letting drug makers pocket that money instead of sharing it with seniors.
Drug-Price Debate Targets Pharmacy Benefit Managers
"I am sympathetic there is an urgency to addressing high drug costs, but this particular proposal has not been thought through," said JC Scott, president of the Pharmaceutical Care Management Association, which represents the PBM industry, in an interview with Stateline.
Pharmaceutical Care Management Association President and CEO JC Scott said in a January 31 statement that PBMs are part of the solution to high cost prescription drugs. Drugmakers alone set and raise prices, independent of rebates, Scott said. "Any proposals to eliminate PBM-negotiated rebates must consider the impact it will have on Medicare beneficiaries' access to affordable prescription drugs."
The Pharmaceutical Care Management Association (PCMA) also issued a statement in response to the proposal. In the statement, PCMA president and CEO JC Scott supported the need to reduce high drug costs but said that PBMs are actually part of the solution. "We are concerned, however, that eliminating the long-standing safe harbor protection for drug manufacturer rebates to PBMs would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses.
Democrats would love to weaponize seniors' health care costs right ahead of the 2020 elections. And Republicans can't be excited to have that problem on their hands, though they could also see some benefit from seniors who see their costs at the pharmacy counter fall.
November 9, 2018
One big issue is rebates — the price concessions that drug companies pay to the health plans and pharmacy benefit managers that help structure a Part D plan’s benefit design. Many well-regarded, high-ranking officials at HHS, including the secretary and the commissioner of the Food and Drug Administration, have criticized these payments. They say that they simply encourage drug companies to raise their prices. Their solution is to end rebates or else substantially curtail current rebate arrangements. But are rebates really the problem? Let’s consider some facts.