The Trump administration released a plan Thursday to encourage insurers who negotiate drug prices to pass savings directly back to patients, part of a larger administration effort to lower drug prices.
Health and Human Services Secretary Alex Azar said in a statement that the plan “has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need.”
The proposal would ban pharmacy benefit managers, the middlemen who negotiate how much to pay for medicines on behalf of insurance plans, from receiving rebates from drugmakers — an arcane practice that the administration blames for high drug prices.
Critics have accused pharmacy benefit managers of failing to pass savings on to patients while keeping a cut for themselves and aiding health insurance companies and employers.
Under the new plan, patients would pay a price for the drug at the pharmacy that is more similar to what the pharmacy benefit manufacturers would have negotiated after the rebates. Pharmacy benefit managers could also agree on fixed fees for drugs instead of a rebate deal.
HHS said patients, particularly seniors, could reduce what they pay for drugs by about 30 percent. The agency released the idea alongside the Office of the Inspector General.
Patients who are covered by Medicare and Medicaid, both government programs, would notice the change, rather than patients on the private health insurance. Still, the private market often follows practices the government carries out.
The rebate deals have historically been protected from a law known as the Anti-Kickback Statute, which says it is illegal to pay an incentive for drugs or services that federal healthcare programs cover. That protection, known as a “safe harbor,” would go away under the HHS idea, and it would therefore become illegal for pharmacy benefit managers to arrange the rebates.
Drugmakers paid out roughly $150 billion in rebates for all insurance plans in 2017, the latest year for which data are available, according to the Pharmaceutical Research and Manufacturers of America, or PhRMA, the trade group representing drug companies.
PhRMA praised the administration’s rule, saying that it would be effective in lowering out-of-pocket costs for patients.
A small number of companies — Express Scripts, OptumRx, and CVS Caremark — control the majority of the marketplace for pharmacy benefit managers. The middlemen have warned that if the federal government pushes for the change, then premiums in Medicare will increase by more than 20 percent. They have said that the rebates they keep are what allow them to keep premiums at bay.
Asked about that possibility in a press call Thursday, a senior HHS official said that was a “kneejerk reaction” by the industry, which preferred to “keep the status quo.”
Azar called the idea a “major departure from a broken status quo that serves special interests” and said Congress should work to pass a bill into law “immediately” that would put the plan into place. The administration’s proposal will collect public comments for 60 days.