The Biden Administration recently delayed a misguided policy called the Rebate Rule, which was rushed into publication by the Trump administration at the very end of its tenure. The policy is derived from Big Pharma’s blame game tactics – designed to evade responsibility for the pharmaceutical industry’s egregious pricing practices by pointing a finger at others in the supply chain.
The Biden administration was right to delay this misguided policy. Now, the administration and Congress must completely eliminate the Rebate Rule and focus on policies that hold Big Pharma accountable for out-of-control drug prices.
It is clear that voters want action on the issue of prescription drug price. A recent Campaign for Sustainable Rx Pricing poll found 96 percent of American voters say lowering drug prices is an urgent challenge among all the issues facing the nation. The Rebate Rule, however, is not the path forward. Analysts from the Congressional Budget Office, Centers for Medicare and Medicaid Services and Avalere Health agree the policy would hike Medicare Part D premiums between 25 and 40 percent, and analysts at Avalere Health found the Rebate Rule would increase out-of-pocket costs for seniors by as much as $36.5 billion.
In addition, the pharmaceutical industry may be supporting the policy because it would boost brand-name drug companies’ bottom line. According to a government analysis, members of Big Pharma would keep the dollars they currently pay in rebates and use the rule as an opportunity to line their own pockets with an increased $137 billion in overall drug spending – a bailout rewarding their anti-competitive and price-gouging behavior – at a time when the industry is already receiving billions of dollars in support for research and development of COVID-19 treatments and vaccines.
These reasons help explain why the previous administration originally scrapped the Rebate Rule in 2019, before hastily pushing it through without going through a legally required process for public input late last year.
Drug companies’ price hikes have continued even during the worst public health crisis of our generation: Big Pharma hiked prices more than 1,000 times in 2020, including at the height of the pandemic. Already this year, we have seen more than 800 price increases on brand name medications. Day after day, we continue to hear stories about patients who are unable to afford their prescription drugs – and resorting to desperate measures including traveling out of the country and rationing or skipping doses — but that has done little to slow Big Pharma’s price increases.
These price hikes are possible because Big Pharma undermines competition from more affordable alternatives through tactics like patent thicketing and product hopping. For example, of the 100 best-selling drugs between 2005 and 2015, almost 80 percent extended their patent protection to block generic competition at least once. And of those same 100 best-selling drugs, nearly 50 percent extended their patents multiple times.
These tactics have real-world consequences. A recent study from the Foundation for Research on Equal Opportunity found ballooning spending on U.S. prescription drugs is being particularly driven by Big Pharma’s abuse of the patent system to undermine biologic and biosimilar competition. The report found that without action, a lack of competition in the biologic drug marketplace will cost American patients more than $30 billion from 2015-2029.
This is why policymakers must be focused on bipartisan, market-based solutions to increase price transparency, boost competition and hold brand name manufacturers accountable.
The Rebate Rule is a pharma-backed distraction from these important priorities and the wrong medicine to lower prescription drug prices.
Lauren Aronson is the executive director of The Campaign for Sustainable Rx Pricing.
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