May 20, 2019

The complicated politics of Trump's rebate rule

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

The mystery of coronavirus superspreaders

Illustration: Sarah Grillo/Axios

A small percentage of people — called superspreaders — may be responsible for a large number of COVID-19 infections, research is starting to indicate.

Why it matters: While there's no method to detect who these people are before they infect others, there are ways to control behaviors that cause superspreading events — a key issue as states start to reopen and debate what types of events are OK.

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 p.m. ET: 5,931,112 — Total deaths: 357,929 — Total recoveries — 2,388,172Map.
  2. U.S.: Total confirmed cases as of 3 p.m. ET: 1,711,313 — Total deaths: 101,129 — Total recoveries: 391,508 — Total tested: 15,192,481Map.
  3. States: New York to allow private businesses to deny entry to customers without masks.
  4. Public health: Louisiana Sen. Cassidy wants more frequent testing of nursing home workers.
  5. Congress: Pelosi slams McConnell on stimulus delay — Sen. Tim Kaine and wife test positive for coronavirus antibodies.
  6. Tech: Twitter fact-checks Chinese official's claims that coronavirus originated in U.S.
  7. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 33 mins ago - Politics & Policy

Twitter fact-checks Chinese official's claims that coronavirus originated in U.S.

Chinese Foreign Ministry spokesman Zhao Lijian. Photo: Greg Baker/AFP via Getty Images

Twitter slapped a fact-check label on a pair of months-old tweets from a Chinese government spokesperson that falsely suggested that the coronavirus originated in the U.S. and was brought to Wuhan by the U.S. military, directing users to "get the facts about COVID-19."

Why it matters: The labels were added after criticism that Twitter had fact-checked tweets from President Trump about mail-in voting, but not other false claims from Chinese Communist Party officials and other U.S. adversaries.