Trump Administration Withdraws Proposed Rule to Block Rebates

Grant Boone
July 13, 2019

President Donald Trump is withdrawing a plan to ease the financial bite of costly medications for people on Medicare by letting them receive rebates that drugmakers now pay to insurers and middlemen, the White House said Thursday.

The paper noted that "evidence on drug pricing calls for caution and calm".

Despite reports of conflict between the two top drug pricing advisers, Grogan and Azar appeared jointly on Capitol Hill this week to encourage Republican senators to finalize a bipartisan compromise package to lower prescription drug costs.

The Trump administration is considering a proposed rule that aims to bring some US drug prices in the Medicare program in line with lower prices paid by other countries that negotiate pricing.

The Trump administration on Wednesday abandoned one of its signature drug-pricing efforts: a ban on numerous rebates that drug companies pay to pharmacy benefit managers under Medicare.

The pushback grew after the nonpartisan Congressional Budget Office said the plan would have little impact on manufacturer prices and would cost taxpayers $177 billion over 10 years.

Shares of pharmaceutical companies dropped Thursday but drugstore chains and insurers gained.

White House spokesman Judd Deere said the Trump administration would turn its focus to prescription drug legislation before Congress, AP reported.

Opposition to the plan within the administration reportedly had a political component as well, with senior White House advisers expressing concerns about increasing Medicare premiums ahead of the 2020 election. Those include "inflation rebates" that drugmakers would be pay directly to Medicare if they raise prices beyond a yet-to-be-determined measure.

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Deere said Trump is not backing away from his promise to lower drug prices, and the administration is setting its sights on bipartisan legislation. The pharmaceutical industry and many conservative groups have vocally opposed that proposal, known as the global price index, often on the grounds that it would implement "socialist" price controls.

Azar also said that he and Trump are working on allowing the importation of cheaper drugs from other countries, a move Trump has endorsed but which drugmakers have long opposed.

The hope was the rule would have effectively pressured drugmakers to give discounts to consumers instead of middlemen, HHS secretary Alex Azar said in remarks to the media in February. The government's inflation index for medications also includes prices for lower-cost generics, and most consumers are anxious about high-priced brand drugs.

The shift is "a substantial setback for drug manufacturers that could have seen a windfall" from the rebate overhaul, said Hunter Hammond, an analyst at Height Securities, in a note to clients.

The rule would have forced healthcare companies like Cigna and CVS Corp to forgo these discounts or pass them onto Medicare patients through their health insurance plans and drug plans.

Labor Department data indicate that something different may be happening to drug prices. Here's what the White House and health policy experts are saying about the significance.

"At the end of the day, while we support the concept of getting rid of rebates ... we're not going to put seniors at risk of their premiums going up", Azar told reporters Thursday.

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