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US government’s new rule targets drug industry’s rebate system

by JMC on February 1, 2019

US Department of Health & Human Services (HHS) has proposed a new rule to end drug rebates and push direct discounts to patients across the country.

The move is intended to lower the prices of prescription drugs and out-of-pocket costs, while improving transparency in the market.

If passed into law, the new rule would eliminate the discounts paid by drugmakers to pharmacy benefit managers (PBMs).

HHS Secretary Alex Azar said: “President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy.

“This proposal 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 new rule would end rebates on prescription drugs paid to PBMs, Part D plans and Medicaid managed care organisations.

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter.”

The rule would also apply to various companies such as Express Scripts, CVS Health and Humana that manage Medicare prescription drug benefits, added Reuters.

HHS expects the proposal to create a safe harbour, providing direct discounts to patients and fixed fee service arrangements between drug manufacturers and PBMs.

Prescription drug rebates, which currently amount to an average of 26%-30% of a drug’s list price, could be directly passed to patients and enable savings at the counter.

In addition, the Department said that drugmakers commonly cite pressure to provide rebates as a reason behind raising their prices, and the new proposal would address this challenge.

HHS added: “This rule provides a clear pathway for drug companies instead to compete to have the lower price and out-of-pocket cost to the patient.”

Additional reporting by Allie Nawrat: 

This legislation appears to be a response to how on 1 January 2019, approximately 30 pharmaceutical companies raised the prices of hundreds of drugs in the US by an average of 6.3%.

Reducing the price of prescription in the US is an important issue for President Trump; it was central to his successful presidential campaign in 2016. In 2018, President Trump pressured drug companies, most notably Pfizer, to postpone their planned price hikes.

The price of drugs  is also an important issue for many Democrats in the legislature. Since pharma companies broke their price freeze, US Senator Bernie Sanders and Representative Elijah Cummings announced plans in mid-January to introduce three new bills to lower the prices of prescription drugs in the country.

Cummings is the chair of the US Committee on Oversight and Reform, which has launched an investigation into the drug pricing practices of multiple pharmaceutical companies.

In addition, Sanofi, Eli Lilly and Novo Nordisk have been sent letters by the Energy and Commerce Committee Chairman Frank Pallone and Oversight and Investigations Subcommittee Chair Diana DeGette regarding the price of their insulin treatments.

The letters asked the drug makers to disclose the average price of their respective insulin products for the past ten years by 13 February this year.

Source: US government’s new rule targets drug industry’s rebate system

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