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Health and Human Services Sec. Alex Azar with President Trump. Photo: Alex Wong/Getty Images

The Trump administration's proposal to shake up how money moves through the prescription drug supply chain in Medicare works best if it's also extended to the commercial market, supporters say.

Yes, but: The politics of the proposal will almost certainly prevent this from happening. Opponents say the change is a handout to pharmaceutical companies and would increase premiums, and analyses of the proposal — including the government's — support this argument.

The big picture: The Trump administration has proposed eliminating in Medicare Part D the rebates that drug companies pay to pharmacy benefit managers in exchange for preferred formulary placement. These rebates then get passed on to insurers, resulting in lower premiums for enrollees.

  • Supporters of the rule say that it eliminates the incentive for drug companies to raise list prices as PBMs require larger and larger rebates, a portion of which they keep for themselves.
  • They also say that moving these rebates to the point of sale helps patients whose cost-sharing is based on the list price of a drug.

The administration doesn't have the authority to extend the rule into the private market, leaving the decision with Congress. But supporters say doing so not only would help patients, but would create a stronger incentive for drug companies to lower their list prices.

  • "Clearly [drug companies] would face a lot more [pressure] if this was extended to the commercial market," former FDA Commissioner Scott Gottlieb said. "My assumption is you'll see some downward pressure on list prices, even if it's just in Part D."
  • But the independent Congressional Budget Office estimated that the administration's proposal — which is limited to Part D — would cost the federal government $177 billion over 10 years, an eye-popping price tag that is giving members of Congress pause.
  • "Why be for something that CBO says has a tremendous cost and there aren’t ways to pay for it?" asked a senior Senate GOP aide.

What they're saying: Drug companies have said publicly that they're more likely to lower list prices if the proposal extends to the commercial market.

  • "It will be important to have any rebate reform apply to both government programs and the commercial market as that will also lead to a lowering of list prices as well. A bifurcated market will make it more challenging for manufacturers to reduce list price," wrote Pfizer CEO Albert Bourla in a response to the Senate Finance Committee.
  • "Our ability to lower list prices...is constrained by the fact that the HHS proposed rule does not apply to the commercial insurance market," Bristol-Myers Squibb's CEO Giovanni Caforio wrote.

The other side: Critics say the proposal is a handout to drug companies, which won't be required to lower list prices. They also point to the very real possibility that it would raise premiums.

  • "There is an obvious financial benefit to manufacturers if the rule is extended to the commercial market," Vanderbilt's Stacie Dusetzina said. "While...the rebate rule sounds appealing, it would most likely drive up spending on drugs and increase premiums without actually providing patients with real financial relief at the pharmacy counter."

Go deeper

Updated 30 mins ago - World

Death toll mounts as fighting between Israel and Hamas intensifies

Palestinian Muslims exchange wishes for Eid al-Fitr, marking the end of the fasting month of Ramadan, near a razed building in the northern Gaza Strip town of Beit Lahia, on May 13. Photo: Majdi Fathi/NurPhoto via Getty Images

At least 109 Palestinians and seven people in Israel have been killed since recent fighting between Israel's military and Hamas began Monday.

The big picture: Israel began massing troops on its border with Gaza on Thursday, launching attacks from the air and ground as Hamas continued to fire rockets into Israel.

By the numbers: Where the earmarks are wanted

Expand chart
Data: House Committee on Appropriations; Chart: Danielle Alberti/Axios

The Dallas-Fort Worth area is being targeted for the largest collective earmark request in the country, according to a detailed breakdown of overall requests released by the House Appropriations Committee.

Why it matters: House appropriators are trying to balance bipartisan momentum for infrastructure investment with "pork-barrel" spending's checkered political history. The data dump is an effort to provide transparency for what are now termed "community project funding" requests.

Democrats open to user fees for infrastructure deal

President Biden sits Thursday with Sen. Shelley Moore Capito (R-W.Va.) as they discuss his $2.3 trillion infrastructure proposal. Photo: T.J. Kirkpatrick/The New York Times/Bloomberg via Getty Images

Some Senate Democrats are open to paying for a compromise infrastructure package by imposing user fees, including increasing the gas tax and raising money from electric car drivers through a vehicle-miles-traveled charge.

Why it matters: By inching toward the Republican position on pay-fors, some Democrats are bucking President Biden's push to offset his proposed $2.3 trillion plan by focusing only on raising taxes on corporations and the wealthy.