‘Rebate Rule 2.0’ Rejects New Ideas to Lower Drug Costs in Favor of Failed Reruns

While debates on health care policy remain divisive in Washington, Republicans and Democrats agree prescription drug costs are too high – and for good reason.

Two-thirds of Americans say their spending on prescriptions has increased since 2017 and a Kaiser Family Foundation poll released last fall shows that 70 percent of voters believe reducing drug costs should be a “top priority” for Congress.

As drug costs increase, health care stakeholders in other sectors are seeking ways to contain expenditures. Top of mind are Medicare Advantage plans that work hard to get discounts from drug manufacturers and then pass along the savings in the form of lower premiums for Medicare Advantage Part D (MA-PD) coverage – which covers all benefits, including drugs – to consumers. Overall, Medicare Advantage premiums are at a 13-year low while Part D premiums are at their second lowest level since 2013.

This is not easy. List prices for the most expensive pharmacy drugs can exceed $70,000 a month.  Even widely used drugs like insulin for Type I diabetics, needed by over 1.6 million patients in the United States, topped out at $5,705 a year in 2016 – nearly double the cost in 2012.

Earlier this year the administration took action to address insulin costs with an innovative savings model that will allow many patients to receive insulin for no more than $35 a month – a bold step that deserves credit. The administration’s latest drug pricing idea, however, hit a sour note for many seniors.

Last month, the president issued an executive order directing the secretary of Health and Human Services to lower drug costs by eliminating the very rebates that keep premiums low for seniors and people with disabilities covered by MA-PD and standalone Part D prescription drug plans. The intent is worthy, but the reality falls short.

If this proposal sounds familiar, that’s because it was first offered 18 months ago. It was evaluated, debated and finally withdrawn last July in light of overwhelming evidence against it.

The administration’s own actuaries found that the plan could raise Medicare Part D premiums by a 19 percent in the first year, and 25 percent in the decade thereafter. The administration also provided several cost estimates for the rule which ranged from saving nearly $100 billion to costing nearly $200 billion – an unthinkable level of uncertainty for serious rulemaking.

Likewise, an Avalere Health analysis found that the rebate ban “would likely have the consequence of increasing beneficiary premiums and reducing benefit offerings.”

Axios reported at the time that the proposal “would largely move money around” and “the pharmaceutical industry would be a winner here” – a widely-held consensus since the rebate ban came straight out of the pharma playbook and did nothing to reduce the list price from drug manufacturers.

Even HHS Secretary Alex Azar agreed with the need to shelve the rebate ban last summer, saying “At the end of the day, while we support the concept of getting rid of rebates … we’re not going to put seniors at risk of their premiums going up.” Vice President Mike Pence and other White House officials have voiced the same concerns.

Weeks after the rebate rule was first put on hold, the HHS Office of Inspector General quietly dropped a report showing that the very rebates the administration sought to eliminate had helped “substantially reduce” Medicare Part D spending from 2011 to 2015.

Some in Washington have seemingly forgotten all of this recent history, because now the administration is resurrecting its rebate ban once again – this time with a new set of talking points.

Trump’s recent executive order reasserts this proposal, but now with the stipulation that the HHS secretary must attest that eliminating drug rebates will not “increase federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.”

That clause is cold comfort for vulnerable seniors, however, who already know that banning cost-saving rebates will indeed raise expenses for beneficiaries – don’t take my word for it, look at the administration’s own studies from when they first attempted this policy last year, as enshrined in the Federal Register.

There’s never a good time to raise seniors’ health care expenditures but doing so at the height of a global pandemic is especially unjust and politically unwise. Finalization of the “rebate rule” would bring harmful consequences for the very seniors that all of us – Democrat and Republican alike – want to protect.

The Trump administration was right to shelve this proposal the first time and to seek out new ideas, including those that inject real accountability for pharmaceutical manufacturers, to help Americans manage the unacceptably high cost of prescription drugs.

We call on the administration to reject the elimination of current rebates and seek alternatives that protect seniors from such far-reaching unintended consequences.


Allyson Y. Schwartz is president and CEO of the Better Medicare Alliance and represented Pennsylvania in the U.S. House of Representatives from 2005 to 2015.

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