The Trump Administration Wants to Put an End to PBM Rebates
By Elizabeth “Issie” Karan

The Hemophilia Alliance is following new developments in the regulation of the drug industry. On January 31, 2019, the Trump Administration announced proposed changes to safe harbor protections under the Anti-Kickback Statute (AKS), which could impact prescription drug markets and indirectly the 340B Discount Drug Program. The overall goals of the proposed rule are to lower out-of-pocket costs for consumers and reduce government drug spending in Federal health care programs.

The Department of Health and Human Services (HHS) proposed modifications to the AKS safe harbor for discounts which would exclude pharmaceutical manufacturer rebates (and other price reductions) provided to plan sponsors under Medicare Part D, Medicaid managed care organizations, or pharmacy benefit managers (PBMs) under contract with them. The proposed rule indicates that the prohibition on price reductions does not extend to those required by law (e.g. rebates under the Medicaid Drug Rebate Program). In addition, HHS proposed two new safe harbors for point-of-sale reductions in price on prescription pharmaceutical products and PBM service fees.

HHS wants to eliminate rebates to plans and PBMs since they believe that rebates contribute to higher drug costs for patients and increase federal spending on drugs. In the preamble to the proposed rule, HHS described how rebates reduce costs for plans but may not reduce out-of-pocket costs for beneficiaries since out-of-pocket costs may be based on the list price of the product before the rebate adjustment. Additionally, HHS voiced concerns regarding the lack of transparency in the rebate systems, requesting stakeholder feedback on the issue and the lack of compliance with program rules. HHS proposed that this amendment go into effect January 1, 2020.

HHS also plans to add two new safe harbors to the AKS, including for point-of-sale reductions and for payments for services to PBMs from manufacturers. HHS argues that point-of-sale reductions pose less risk of fraud to federal health care programs and could incentivize giving discounts directly to consumers. HHS would require that the price reduction be set in advance, not involve any rebates, and be completely reflected in the price charged to the consumer at the point-of-sale. For the new safe harbor for services fees to PBMs, HHS would allow manufacturers to pay PBMs for services furnished directly to the manufacturer but not for services related to the PBM’s work with health plans. For this safe harbor to apply, the PBM and the manufacturer would need to have a written agreement in place that meets certain standards. Additionally, the payments must be consistent with fair market value, be fixed and not based on a percentage of sales, and not be determined in a manner that takes into account the volume or value of any referrals or business.

Abolishing plan and PBM rebates could indirectly impact covered entities in the program although nothing in the proposed rule makes direct changes to the 340B Drug Discount Program. Simply put, plans and PBMs will be making less money and will want to correct for that shortfall somehow. In the coming months, we anticipate proposals for fee schedules and services payments from parties impacted by the proposed rule which reflect these losses. Meaning, plans and PBMS will likely increase their charges and costs in the coming year. HTCs should remain vigilant and contact the Hemophilia Alliance with questions or concerns.

The proposed rule can be found here, and comments are due April 8, 2019. The Alliance is considering whether and how to comment on the proposed rule and will share any comments with the membership.

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