Trump Plan to curb Medicines Prices focuses on discounts to pharmacist benefit managers

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The Trump administration proposed to put an end to a complex system of drug discounts that would affect tens of billions of dollars in pharmaceutical spending in the US, a move that could improve the relationship between drugmakers and intermediaries in the pharmacy.

The proposal, a long-awaited part of the government's plan to focus on high drug prices, would forbid discounts paid by pharmacists to pharmacy providers or PPEs in government programs such as Medicare.

These rebates have been called anti-competitive by critics, who blame them for forcing many patients to pay more out of their own pocket. According to the administrative proposal, discounts would instead be passed on directly to customers.

The proposal anticipates President Donald Trump's speech on Tuesday's State of the Union agenda, culminating in a potential victory over drug pricing – a major problem for both parties. The measure, released by the Department of Health and Human Services Thursday, would reverse so-called safe haven protection for such discounts, which prevented them from working against federal anti-kickback laws. The plan is not final and will take 60 days for public comments.

The changes are "potentially devastating to the current pharmacology system," said Eric Coldwell, an analyst at Baird Equity Research. "The American health care system is a sandcastle and the tide is coming."

The shares of large providers of drug planning declined. CVS Health Corp., which controls more than 90 million Americans on drug benefits, dropped 2.4 percent in late New York trade, and Cigna Corp., which bought PBM giant Express Scripts last year, dropped 1.4 percent .

Drugmakers pay discounts to insurers and PPEs in exchange for preferential status among the customers of those plans. Some of these discounts go to insurance premiums, while the middlemen keep something for themselves. The pharmaceutical industry has said that PPEs prefer expensive medicines so that they can negotiate larger discounts and collect more of the money.

In a statement announcing the proposal, HHS secretary Alex Azar deletes PBM discounts as "a hidden system of kickbacks for intermediaries" that increases daily medication costs for Americans.

"This proposal has the potential to be the most significant change in the way Americans' drugs are priced at the pharmacy, once, and ultimately alleviate the burden of sticker-shock that millions of Americans experience every month for the drugs that they need it, "Azar said in a statement.

Reporting by Bloomberg News in the last three years has examined a number of pricing methods in PPEs that have been criticized by politicians and others to make it difficult to get the money. In addition to the debate on discounts, PPEs are also checked for a practice known as "spread pricing", a contractual arrangement that allows PPEs to pay pharmacies one price for one generic medicine while calculating higher prices to their customers for their health plan.

CVS said that drug makers were blamed for the cost of drugs. "Although PBMs have become a useful target in the fight against sky-high drug costs, they actually serve as a last line of defense for the consumer," the company said in a statement.

Brian Henry, a spokesman for Cigna, said discounts helped to keep premiums low overall. "It is short-sighted to look at a part of our offering that has a disproportionate impact on our business model," Henry said in an e-mail.

According to the proposal, protection from safe havens would be excluded for discounts paid by pharmacists to pharmacy benefit managers, Medicare Part D plans and Medicaid managed care organizations. A new safe haven would be created for discounts on drug discounts offered directly to patients, as well as fixed reimbursement arrangements between drugmakers and PPEs. Without safe haven protections, money deduction with pocket PPEs could be considered as an illegal kickback.
Congress
While the cash costs for many people picking up drugs at the pharmacy would decrease, the premiums they pay for coverage would increase. Premiums for medications Medicare plans under the proposal could rise anywhere from 8 percent to 22 percent, while the average cost patients paying from their own pocket would fall 9 percent to 14 percent, according to the Department of Health and Human Services.

It would be up to Congress to write new laws prohibiting discounts in commercial plans that affect most Americans of working age, and the reception at Capitol Hill was mixed. In the Democratic House of Representatives controlled by the Democrats, the presidents of two major health care monitoring committees criticized the proposal.

"The majority of Medicare beneficiaries will see their premiums and total out-of-pocket costs rise when this proposal is finalized," said Frank Neal Chairman of Massachusetts and Energy & Commerce Committee, chairman of the Ways & Means Committee, Frank Pallone from New Jersey. statement. "We are worried that this is not the right approach."

Landlord Nancy Pelosi also urged Trump to work with legislators on the cost of medicines.

"President Trump needs to work with Congress to deliver the real, tough legislation needed to lower the price of prescription drugs for seniors and families across America." She said in a statement expressing criticism of the plan.

The Pharmaceutical Care Management Association, an industry group for PPE, said it was reviewing the proposed rule.

"We are ready to work with the administration to achieve our common goal to reduce high drug costs," said JCSCO Director JC Scott in a statement.

The Pharmaceutical Research and Manufacturers of America, the most important trading group in the pharmaceutical industry, welcomed the move. The proposal would "restore the misaligned incentives in the system" that now result in insurers and PPEs that prefer drugs with high list prices, said PhRMA CEO Stephen Ubl in a statement.

Copyright 2019 Bloomberg.