Trump administration proposes rules for Medicare plans as it seeks to lower drug prices

By | February 1, 2019

The Trump administration announced Thursday new proposals that would ban what it calls “backdoor rebates,” as it seeks to lower drug costs for consumers at the pharmacy counter, a move that could impact the way insurers negotiate discounts on pharmaceuticals from manufacturers.

CVS Health’s merger with Aetna and Cigna’s acquisition of Express Scripts. UnitedHealth Group owns the OptumRX PBM and Anthem will be launching its own unit IngenioRx in the second quarter.

“The market consolidation that we’ve seen with pharmacy benefits managers… makes it harder ( for drug makers) to push back against this demand for rebates” explained Lindsay Bealor Greenleaf, a director at ADVI Health, a health care policy consultancy. She said last fall, the administration proposed giving Medicare plans and PBMs more power to negotiate discounts from drug makers last fall, along with greater flexibility to favor less expensive drug in their drug plans.

“This proposal is more of a balanced approach with (the administration’s) prescription drug reform, considering the increased leverage” of the PBMs, Greenleaf explained.

Insurers and pharmacy benefit managers have argued that the rebates are spread across the pool of insured patients in order to keep overall premiums lower. They warn that getting rid of the rebates altogether would result in higher insurance rates for all patients.

A senior health official said that under their proposed rule, the administration calculates that Medicare Part D premiums could go up between $ 3 to $ 5 per month, but for those who rely on drugs for chronic conditions “the savings far exceeds that” and the proposed system could bring overall list prices down by 30 percent.

The proposed rules would only apply to Medicare and Medicaid plans, under the revised kick-back statutes. But senior administration officials say the new rules could ultimately influence the way private sector drug plans are negotiated, as well.

“Maybe it will move everyone to a new structure,” said Greenleaf. But she added that it could result in cost-shifting to private health plans.

“If PBMs aren’t able to extract rebates for the government beneficiaries, maybe that could result in even bigger rebates (and higher list prices) on the commercial side.”

— CNBC’s Angelica Lavito contributed to this report.

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