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The Trump administration proposed ending a complex system of drug rebates that influence tens of billions of dollars in U.S. pharmaceutical spending, a move that could upend the relationship between drug makers and pharmacy benefits middlemen.
The proposal, a long-awaited part of the administration’s plan to target high list prices of drugs, would ban rebates paid by drugmakers to pharmacy benefit managers, or PBMs, in government programs like Medicare.
Trump Targets Drug Middlemen With ‘Devastating’ Rebate Plan
Those rebates have been called anticompetitive by critics, who blame them for forcing many patients to pay more out of pocket. Under the administration proposal, rebates would instead be passed along directly to customers.
The proposal comes ahead of President Donald Trump’s State of the Union address scheduled for Tuesday, handing him a potential win on drug pricing -- a major issue for both parties. The measure, released by the Department of Health and Human Services Thursday, would roll back so-called safe-harbor protections for such rebates, which kept them from running afoul of federal antikickback laws. The plan isn’t final and will be subject to a 60-day period for public comment.
The changes are “potentially devastating to the current pharma ecosystem,” said Eric Coldwell, an analyst with Baird Equity Research. “The U.S. health-care system is a sandcastle and the tide is coming in.”
Shares of major drug-plan providers fell. CVS Health Corp., which oversees drug benefits for more than 90 million Americans, fell 2.4 percent in late trading in New York, and Cigna Corp., which last year bought PBM giant Express Scripts, declined 1.4 percent.
Drugmakers pay rebates to insurers and PBMs in exchange for preferred status with those plans’ customers. Some of those rebates go toward insurance premiums, while the middlemen keep some for themselves. The pharmaceutical industry has said PBMs prefer higher-priced drugs so they can negotiate bigger rebates and pocket more of the money.
The Trump administration proposed ending a complex system of drug rebates that influence tens of billions of dollars in U.S. pharmaceutical spending, a move that could upend the relationship between drug makers and pharmacy benefits middlemen.
The proposal, a long-awaited part of the administration’s plan to target high list prices of drugs, would ban rebates paid by drugmakers to pharmacy benefit managers, or PBMs, in government programs like Medicare.
Trump Targets Drug Middlemen With ‘Devastating’ Rebate Plan
Those rebates have been called anticompetitive by critics, who blame them for forcing many patients to pay more out of pocket. Under the administration proposal, rebates would instead be passed along directly to customers.
The proposal comes ahead of President Donald Trump’s State of the Union address scheduled for Tuesday, handing him a potential win on drug pricing -- a major issue for both parties. The measure, released by the Department of Health and Human Services Thursday, would roll back so-called safe-harbor protections for such rebates, which kept them from running afoul of federal antikickback laws. The plan isn’t final and will be subject to a 60-day period for public comment.
The changes are “potentially devastating to the current pharma ecosystem,” said Eric Coldwell, an analyst with Baird Equity Research. “The U.S. health-care system is a sandcastle and the tide is coming in.”
Shares of major drug-plan providers fell. CVS Health Corp., which oversees drug benefits for more than 90 million Americans, fell 2.4 percent in late trading in New York, and Cigna Corp., which last year bought PBM giant Express Scripts, declined 1.4 percent.
Drugmakers pay rebates to insurers and PBMs in exchange for preferred status with those plans’ customers. Some of those rebates go toward insurance premiums, while the middlemen keep some for themselves. The pharmaceutical industry has said PBMs prefer higher-priced drugs so they can negotiate bigger rebates and pocket more of the money.
