Faced with a tradeoff between low Medicare premiums that benefit all beneficiaries and lower out-of-pocket costs that benefit the sickest beneficiaries, the Trump administration chose lower premiums, sinking a proposed rule that would have pulled drug rebates from the safe antikickback harbor.
It's the second administration proposal aimed at reducing U.S. drug prices to be cut adrift this week, following in the wake of Monday's federal court decision that Health and Human Services (HHS) exceeded its Congress-given authority with a rule requiring drug companies to include list prices in TV ads. (See BioWorld, July 10, 2019.)
"Those are two big hits in one week for the administration," Lindsay Bealor Greenleaf, director of policy at ADVI Health, told BioWorld.
Thursday's news that the administration was abandoning the rebate rule was both a surprise and a disappointment for the biopharma industry. It also will increase pressure on Congress to enact drug pricing reforms and pressure the administration to do something "new" about prescription drug prices, Bealor Greenleaf said. That something, she added, could be the rollout of a demonstration model using an international pricing index (IPI) to set Medicare prices for Part B drugs, which are administered by providers.
While an IPI pricing model could provide savings to Medicare, it wouldn't help consumers much, Bealor Greenleaf explained. Patients' out-of-pocket cost for Part B drugs is not nearly as high as it is for Part D drugs, which are impacted by PBM rebates. In 2017, 1 million Medicare beneficiaries spent more than $3,200 each out of pocket for drugs at the pharmacy. Part B out-of-pocket costs didn't come anywhere near that amount, Bealor Greenleaf said.
The Biotechnology Innovation Organization (BIO) and Pharmaceutical Research and Manufacturers of America (PhRMA) called the administration's backtracking on the rebate rule a blow to the nation's most vulnerable seniors.
"Of all the policies proposed in Washington right now, this was the only proposal that would provide immediate savings at the pharmacy counter, instead of only saving the government or insurance companies money," Holly Campbell, PhRMA's deputy vice president for public affairs, told BioWorld.
Bealor Greenleaf agreed that the rebate rule would have been the first step to lowering patients' drug costs, as rebates paid to pharmacy benefit managers (PBMs) and other middlemen costs account for more than 40% of the list price of drugs picked up at the pharmacy. "Today's a big victory for the middlemen, the PBMs specifically," she added.
In addition to ensuring that rebates drug manufacturers pay to PBMs for preferable formulary positions are passed on to consumers, the rule would have "delivered meaningful transparency to an opaque system that puts the financial interests of middlemen ahead of the well-being of patients," BIO President and CEO Jim Greenwood said.
He noted that President Donald Trump had "promised to rein in the role of middlemen and ensure patients directly benefit from the significant rebates biopharmaceutical companies provide, but today that promise was broken."
Instead of standing up to the middlemen, the Trump administration "succumbed to the same old scare tactics we see from the insurance industry whenever policymakers aim to address the discriminatory tactics insurers use against patients," Greenwood said.
Sen. Chuck Grassley (R-Iowa) was not as pessimistic about the scuttling of the rebate rule, though he did recognize the added pressure for Congress to do something about drug prices. "I had some concerns about the administration's proposed rebate rule, but President Trump and [HHS] Secretary Azar should be commended for being aggressive in their work to lower prescription drug prices," he said. "The withdrawal puts even more pressure on Congress to step up to the plate. It's time for Congress to legislate and deliver on our promise to lower health care costs for Americans."
Even as the administration efforts foundered Thursday, the House Energy and Commerce Subcommittee on Health unanimously voted to advance the FAIR Drug Pricing Act, H.R. 2296, to the full committee. The legislative package is swimming with measures to bring more transparency to how drug prices are set and what role the supply chain plays in pricing.
For instance, the bill would require drug companies to notify HHS at least 30 days in advance of certain price increases and submit a report justifying the increase. The penalty for not complying would be $75,000 a day. That also would be the penalty for submitting false information. The bill also calls for PBMs to report aggregate information about rebates and charges the Federal Trade Commission with studying competition within the supply chain.
The bill has bipartisan support, but lawmakers on both sides of the aisle recognized it will do nothing to directly reduce what American consumers pay when they fill a prescription.
"Transparency is good for consumers, bad for pharma," Rep. Peter Welch (D-Vt.) said in the leadup to the subcommittee's vote on H.R. 2296. While the transparency tools the bill provides will be helpful, "we've got to get to a place where we concretely bring down the price of drugs," Welch added.
"Let's not get too satisfied until we actually can get the price that our consumers pay much more in line with what consumers in Europe and in many other parts of the world pay," he continued.
Rep. Buddy Carter (R-Ga.), one of the sponsors of the expanded H.R. 2296, echoed Welch's concerns. "This is a good bill, and it's certainly going to help," he said, "but we've got a lot more work to do on this particular subject."
On the other side of Capitol Hill, Grassley stood on the Senate floor Thursday to urge his colleagues to work together to get the drug pricing-related bills crafted in the various Senate committees "across the finish line." His comments may have been directed at members of the Finance Committee, which he chairs.
While the Senate Judiciary Committee and the Health, Education, Labor and Pensions Committee advanced drug pricing bills to the Senate floor late last month, the Finance Committee is still negotiating the final details of its legislation, which Grassley had hoped to release after the July Fourth recess. Like the other Senate bills and H.R. 2296, the Finance "bill will bring much-needed transparency to drug pricing, including the role of middlemen and rebates in the system," Grassley said. (See BioWorld, June 27, 2019, and June 28, 2019.)
In a progress report Thursday, Grassley said, "We're on track to report a bill out of committee very soon." The legislation from the various Senate committees are expected to be bundled into one package that will be put to a vote before the full Senate – something Senate leaders had proposed to do this month.
Meanwhile, the idea of requiring TV ads to include drug pricing information is still afloat. Grassley said he's working with Sen. Dick Durbin (D-Ill.) to put that requirement into law. "Big pharma is already required to disclose side effects in their ads. Consumers ought to know what the advertised drug will cost," he said.