Congress Should Act Quickly to Permanently Repeal the Rebate Rule

While Congress and the Biden administration, as well as stakeholders across the prescription drug supply chain, examine policy options for addressing high drug prices, pharmacy benefit managers continue to create access to affordable medications for patients. But Medicare’s rebate rule is threatening to unwind PBMs’ ability to lower prescription drug costs. The time is now for Congress to repeal this costly rule.

The Medicare Part D program is a shining example of the success of the PBM industry. Part D plans, which employ PBMs to negotiate with drug manufacturers, compete against other plans for enrollees based on premiums and benefit designs.

Drug manufacturers compete against each other for formulary coverage by negotiating rebates with PBMs. Rebates are the key to PBMs’ success in achieving access to affordable medications for America’s Medicare beneficiaries through the Part D program. The rebate rule, finalized without public input by the previous administration, fundamentally restricts negotiations between PBMs and drug manufacturers.

The Biden administration commendably postponed the effective date for the rebate rule until 2023. Despite the delay, uncertainty remains for PBMs and Part D plans as preparations for 2023 will be underway in just a few short months. Under the Medicare Part D program’s structure, rebates need to be negotiated far in advance so plans can accurately submit their bids in the spring prior to a given plan year. While a delay until 2023 might seem to offer considerable time, PBMs begin negotiations with manufacturers later this year to inform bid submission in the spring of 2022. Thus, action on the rebate rule is urgently needed now to avoid disrupting the Medicare Part D program and significantly increasing premiums for seniors.

The cleanest path forward to avoid severe disruption to Part D, caused by jarring monthly premium increases, is for Congress to quickly repeal the rebate rule outright.

We understand that the Part D prescription drug program is not perfect. After 15 years, it’s likely time to modernize the benefit to better reflect the evolution in prescription drug costs and strategies to encourage beneficiaries to get and stay on their medications. Implementing the rebate rule, however, is precisely the wrong approach to updating Medicare Part D.

Prescription drug rebates are a cost-savings tool, in Medicare as well as other health care markets. While drug manufacturers alone set drug prices, PBMs leverage competition across manufacturers to reduce enrollee premiums and to keep down the cost that consumers pay for their prescriptions. Indeed, almost universally across Medicare Part D, rebates are passed through to plan sponsors and used to enhance benefits or to reduce beneficiary premiums.

As a result, Part D monthly premiums have remained affordable. But if the rebate rule is not repealed, the affordable premiums that beneficiaries have relied upon will rise. The Centers for Medicare and Medicaid Services estimates that the rule will increase premiums for seniors by as much as 25 percent – the largest average premium increase in the history of Part D.

Allowing the rebate rule to proceed is rolling the dice with Medicare beneficiaries’ access to needed medications. We look forward to working with the administration and Congress on strengthening the prescription drug program and addressing high prescription drug costs in Medicare Part D.

JC Scott is the president and CEO of the Pharmaceutical Care Management Association.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.