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PhRMA comments on OIG proposed rule to reform the rebate system

Holly Campbell   |     April 8, 2019   |   SHARE THIS

Today, PhRMA submitted comments on the Department of Health & Human Services (HHS) Office of Inspector General (OIG) proposed rule, “Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees.”

Here are excerpts from key sections of our comments:

PhRMA Supports the Policies Underlying the Proposed Rule, to Achieve Solutions that will Help Patients and Produce Better, More Efficient Health Care.

  • “PhRMA supports the policies underlying OIG’s proposed modifications to the safe harbors and our member companies are committed to working with OIG to facilitate implementation by 2020 so that Medicare Part D beneficiaries may see the benefit of these policies. Rapid implementation of the reforms proposed by OIG will be challenging for manufacturers and other stakeholders, but we consider these changes too important to delay.”

Implementation is Possible for 2020 but Would Require CMS and OIG to Work Quickly to Ensure Clear Rules of the Road for Manufacturers, Part D Plans, and Supply Chain Entities.

  • “… PhRMA urges OIG to finalize this rule as expeditiously as possible, such that savings from negotiated discounts may be passed on to beneficiaries. The January 1, 2020 timeline is aggressive but attainable and will ensure that beneficiaries begin to benefit from the proposed policy changes as soon as possible.”

Current Rebate System Drives a Widening Gap Between List and Net Prices, Increasing Cost Sharing for the Sickest Patients.

  • “As OIG notes, the current rebate framework may incentivize both PBMs and health plans to favor medicines that carry higher rebates. These misaligned incentives may also be the result of the types of arrangements PBMs commonly negotiate with their health plan clients, which allow PBMs to retain a portion of negotiated rebates and / or other price concessions as compensation for their services pursuant to their arrangements with those plans …”
  • “Since PBMs can influence medicine affordability and availability through their decisions about formulary coverage, utilization management, and formulary tier placement … A hypothetical manufacturer’s unilateral decision to lower list price could result in a PBM then taking action to significantly reduce formulary access for that manufacturer’s medicine, which in turn could significantly impact affordability and access for patients taking that medicine.”
  • “The gap between list and net prices also has implications for federal spending on Medicare Part D low-income cost sharing subsidies and reinsurance payments. ... Today, beneficiaries progress through the Part D benefit based on spending levels tied to undiscounted prices. This results in more enrollees reaching catastrophic coverage—where the government pays 80 percent of beneficiaries’ total drug spending—than if net spending were used to determine progression through the benefit.”

 If Finalized, the OIG Proposed Rule Could Lower Costs for Millions of Part D Beneficiaries.

  • “An analysis by Avalere Health shows that a typical Part D beneficiary with diabetes taking five medicines, including insulin, could experience a decline in annual out-of-pocket costs of $962. Even when accounting for a projected increase in Part D premiums of $6 per month, this beneficiary would still see total annual savings of nearly $900. “
  • “A Part D beneficiary with rheumatoid arthritis (RA) taking four medications, including a brand RA therapy, could see total annual savings of $844, whereas a Part D beneficiary with hepatitis C and taking two medications, including a direct-acting brand antiviral, could save over $3,300.”
  • “If net prices were to become the standard for measuring program growth, there could be a large drop in the Part D benefit parameters beginning in 2021, resulting in a larger number of beneficiaries with cost sharing savings (including those taking only generic drugs).“

The Antitrust Laws Do Not Pose an Obstacle to Implementation of the Proposed Rule.

  • “Neither the Robinson-Patman Act nor the Brand Name Prescription Drugs litigation prevents prescription pharmaceutical manufacturers from offering upfront discounts. Although the proposed rule incentivizes a shift from retrospective rebates towards upfront discounts for prescription medicines, rebates do not occupy a unique position insulated from antitrust scrutiny.”

Read the full comments here.

Holly Campbell

Holly Campbell Holly Campbell is a deputy vice president of public affairs at PhRMA focusing on the cost and value of medicines. Prior to joining PhRMA, Holly worked for large and small public relations firms where she provided strategic communications counsel, media relations and partnership expertise to health care and pharmaceutical clients. In her free time, she enjoys taking barre classes, trying new restaurants and spending time with Boss and Poppy, her rescue pups.

Topics: Part D, Medicare, Let's Talk About Cost, Prescription for Medicare

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