By David Balto
February 14, 2019 at 5:00 am ET
Changes in health care policy frequently move at glacial speed to the frustration of patients calling out for solutions. To its credit, the Trump administration unveiled a bold, sweeping policy proposal aimed at addressing one of the most critically broken elements of our prescription drug distribution system: pharmacy benefit manager and insurers’ practices regarding prescription drug rebates.
For too long, this particular area of health care remained troublingly opaque for regulators and patients alike. Scant transparency allowed industry middlemen to pocket discounts designed for patients.
The Trump administration just took a step toward changing all of that.
The Department of Health and Human Services recently proposed a major overhaul of our drug purchasing system. Namely, HHS is looking to eliminate a legal exemption used by middlemen to pad their pockets with rebates from drugmakers created to help patients at the pharmacy counter. It’s about time.
HHS correctly notes that rising costs are directly correlated with skyrocketing rebates as market pressures create this problematic feedback loop, without any thought to patients’ individual bottom lines. These misaligned incentives perversely encourage PBMs and insurers to continue their dubious practices, knowing they could not be fined for these actions thanks to “safe harbor” protections.
Under the new proposal, regulators would be allowed to more readily scrutinize these rebates and create consequences for these particularly bad actors in the health care marketplace who do not pass them along to patients. This could have a profound impact on Medicare beneficiaries’ ability to afford the treatments they need.
Rebates today reportedly amount to 26 to 30 percent of a drug’s list price. Reductions to costs in that range could very well make the difference for patients’, particularly those on fixed incomes, overall health and well-being.
Additionally, this proposal brings renewed scrutiny on a section of the marketplace that is clearly not working; one plagued with anticompetitive behavior, significant consolidation and regulatory neglect. Bringing transparency into the backroom and hidden machinations of prescription drug middlemen can help dissuade some of the most aggressive and anti-consumer practices that have harmed the pillars of our health care system: choice, access and affordability.
While this is a significant first step toward the vision laid out by President Donald Trump and his administration’s “American Patients First” plan to lower prescription drug prices and out-of-pocket costs, we still have a long way to go. The complex and arcane regulations governing our health care system must be addressed to better ensure the free market is working as it should on behalf of patients. A working free market is one that fosters competition, one that defends consumers against potential industry malpractice and ensures a fair deal.
We should applaud the Trump administration for recognizing this problem that impacts the lives of millions of everyday Americans and working to find actionable solutions. Champions in Washington, willing to disrupt the middleman-driven status quo in health care are unfortunately few and far between.
Together with allies in the states, Capitol Hill and across the administration, we can make a better system for patients. All it took is for someone to finally say “enough.”
David Balto is a former policy director of the Federal Trade Commission’s Bureau of Competition and a former antitrust lawyer at the U.S. Department of Justice, and he has since represented numerous consumer groups on health care competition issues, including Consumers Union, Consumer Federation of America and Consumer Action.
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