White House Kills Plan for Drug Rebate Rule

White House Kills Plan for Drug Rebate Rule

The Trump administration abandoned a controversial proposal that would have overhauled the rebate system, according to The Hill.

According to Pfizer's suit, J&J threatened to withhold rebates (which often grow larger as performance metrics such as market share or volume rise, or which may be bundled together with rebates for other products) from insurers unless they agreed to exclude biosimilars from their formularies.

After two setbacks this week, President Donald Trump is now focusing his drive to curb drug costs on congressional efforts aimed at helping people on Medicare and younger generations covered by workplace plans.

The rule would have excluded rebates from safe harbor protections that now shelter drug makers' rebates from penalties under the federal Anti-Kickback Statute and would have formed new safe harbor protections for discounts offered directly to patients, as well as fixed-fee service arrangements between drug makers and PBMs.

Shares of health insurers such as UnitedHealth Group Inc, Cigna Corp and drug distributors like McKesson Corp rose after the report.

Baird analyst Eric Coldwell said Trump was likely refocusing his reform efforts on the drugmakers themselves.

Earlier a federal judge ruled that the administration lacked the legal authority to require drugmakers to disclose list prices in their TV ads.

"Shelving the rebate reform initiative, which pharma strongly supported, feels like payback", he added.

Rebates are a largely unseen part of the complex world of drug pricing.

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Several Democratic presidential hopefuls have also seized on drug pricing as a key issue for the 2020 elections. Dick Durbin, the chamber's second-ranking Democrat, are pushing legislation that would grant the government such powers.

Under the administration's proposal, that arrangement would not have been permitted for Medicare and Medicaid and the managers would have had to pass the rebates to patients at the pharmacy counter. "Any solution should start with addressing drug prices". Instead, drug companies would have been encouraged to pass the discounts directly to patients at the pharmacy counter.

It was a defeat for the pharmaceutical industry, which had lobbied to promote rebates. The move could have upended the way the US pays for drugs. Most European countries pay for citizens' healthcare and directly negotiate drug prices. Drugmakers prefer that to other approaches lawmakers are considering.

The rebate rule, which once finalized would have gone into effect next year, was estimated by the nonpartisan Congressional Budget Office to cost the government $177 billion over the next 10 years. The CBO also said that it was likely that drugmakers would not cut their prices because of the rule.

The government had hoped that by eliminating rebates of 15 percent to 30 percent, or more, of a drug's listed price, the prices would fall.

Administration officials and Health and Human Services Secretary Alex Azar disagreed on whether the rebate rule would be worth the approximately $180 billion it would cost the government over a decade.

Pharmacy and health insurance stocks jumped on Thursday after the White House announced it would scrap its drug rebate plan.

U.S. Secretary of Health and Human Services Alex Azar speaks with members of the press at the White House in Washington, U.S. June 24, 2019.

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