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Health and Human Services Secretary Alex Azar. Photo: Chip Somodevilla/Getty Images

The Trump administration is rolling out the policy specifics for a central promise in its plan to lower drug prices — taking on the system's middlemen.

The big picture: Health and Human Services Secretary Alex Azar has long had his eye on pharmacy benefit managers and the rebates that are their bread and butter.

  • The proposal HHS unveiled yesterday would essentially ban those rebates in Medicare and Medicaid, forcing PBMs to collect a flat fee for their work.

How it works: Today, drug companies set a price for their products and then PBMs negotiate a discount in the form of a rebate, on behalf of insurance plans. PBMs keep some of that money for themselves and the insurers use some of it to help lower premiums across the board.

  • HHS wouldn't allow that any more under the proposed rule, but it would permit discounts that flow directly to patients at the pharmacy counter.

Winners: In the short term, this would largely move money around. Patients would pay less at the pharmacy — which is good news for seniors who take a lot of expensive drugs.

  • The trade-off is that Part D premiums would increase, which in turn increases the government's costs.
  • HHS expects the savings from lower out-of-pocket costs to exceed the increase in premiums.
  • Politically, the pharmaceutical industry would be a winner here, too: Pointing the finger at PBMs is a big part of its strategy to stave off tougher controls on its own prices.

In the long term, HHS is hoping this will change the pharmaceutical industry's pricing practices.

  • For example, drug companies will sometimes agree to steep rebates in exchange for PBMs giving their drug preferred treatment over a competitor.
  • Without the rebate structure in place, the hope is that those types of deals simply won’t be possible, and pricing negotiations will center more heavily around drugs’ sticker prices.

The bottom line: This is a major shakeup in the way we pay for drugs. It's in the weeds, and it’s not a cure-all (nothing is), but it's big.

Go deeper: The drug pricing maze

Go deeper

10 hours ago - World

Over 170 Palestinians injured in clashes with Israeli police in Jerusalem

An injured man is carried away as Israeli security forces clash with Palestinian protesters at the al-Aqsa mosque compound in Jerusalem. Photo: Ahmad Gharabli/AFP via Getty Images

At least 178 Palestinians have been injured in clashes with Israeli police in Jerusalem, Reuters reported late Friday.

The big picture: The clashes come amid growing anger over the threatened eviction of Palestinians from their homes on land claimed by Jewish settlers in East Jerusalem. Tensions have also escalated in the occupied West Bank in recent weeks.

Updated 13 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: Coronavirus cases hit a seven-month low — Majority back vaccine proof requirements for travel, schools and work — The race to avoid a possible "monster" COVID variant.
  2. Politics: Oklahoma secures $2.6 million refund for hydroxychloroquine purchase — Why Biden's latest vaccine goal is his hardest yet.
  3. Vaccines: Pfizer begins application for full FDA approval of COVID-19 vaccine — Moderna says its COVID booster shot shows promise against variants.
  4. Economy: U.S. adds just 266,000 jobs in April, far below expectations — Americans' return to the skies could benefit smaller airlines.
  5. World: WHO authorizes China's Sinopharm COVID-19 vaccine for emergency use — Mixed response in Europe to Biden's vaccine patents bombshell.
  6. Variant tracker: Where different strains are spreading.

Ohio GOP censures Rep. Anthony Gonzalez over Trump impeachment vote

Photo: Bill Clark/CQ-Roll Call, Inc via Getty Images

The Ohio Republican Party on Friday censured Rep. Anthony Gonzalez (R-Ohio) and called for him to resign for voting to impeach former President Trump in January, Reuters reports.

The big picture: Gonzalez is the latest Republican lawmaker to be punished for voting to impeach the former president on a charge of inciting the deadly Jan. 6 insurrection.