Trump Administration Abandons Proposed Rebate Rule To Lower Drug Prices

This morning the Trump administration abandoned its proposed rebate rule to eliminate safe harbor protection for most Medicare rebates acquired by pharmacy benefit managers (PBMs) and to require that those rebates be passed on to consumers, lowering prescription drug costs. This abrupt change is very disappointing for consumer groups, advocates of transparency and accountability in the drug supply chain, and anyone who wants reduced drug prices.

In a discussion with Axios, White House spokesman Judd Deere did not offer in-depth reasons for the change. He simply said, "Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule." He also claimed that the Trump administration is encouraged by bipartisan discussions about how to bring drug prices down and that the President will not hesitate to use any and all means at his disposal to accomplish this goal.

In late January 2019, President Trump and Health and Human Services Secretary Alex Azar announced the proposal with great pomp and circumstance, and laid out how PBMs contribute to higher drug costs and why rebates should go to consumers instead of being pocketed by middlemen. As a result, the administration's sudden announcement that the rule is no longer being considered is all the more surprising.

This proposed rule would have eliminated the rebates that drug companies pay to PBMs that operate Medicare’s Part D drug plans, and instead required that any discounts be passed to consumers when they purchase drugs at pharmacies. Medicare beneficiaries with high drug costs usually have to pay a drug’s list price, or a percentage of it, during certain phases of their coverage. Evidence is growing that PBMs keep substantial rebates for themselves and drive up prescription drug costs, since their rebates are usually based on a percentage of the drug's list price.

Secretary Azar was a strong proponent of the rule, but some reports said that Joe Grogan, head of the White House's Domestic Policy Council, opposed it. He and other officials claimed that the rule was too expensive. They also worried that it would raise premiums for seniors.

This is the second time this week that the Trump administration's proposals to lower drug prices have fallen short. Just a few days, a federal judge ruled that the administration could not compel drug companies to display the list prices of their drugs in TV ads.

We are disappointed in the administration's abandonment of this excellent proposal. Fortunately, Congress is considering numerous bills to regulate PBMs, outlaw some anticompetitive practices they engage in, and require that rebates not just in Medicare but in the commercial insurance market as well. It is now all the more important that Congress pass comprehensive PBM reforms to hold them accountable and lower drug costs.