BMA in the News
July 11, 2019

Trump’s Aborted Drug Price Rule Spares ‘Middlemen’ And The Drug Industry

By Bruce Japsen

News that Donald Trump has killed a plan to eliminate rebates health plans receive from the government when negotiating drug purchases for seniors is good news for ‘the middlemen’ he once said were getting rich off U.S. drug pricing.

A check of health insurer stock prices Thursday will tell you they’ll still be getting rich off of their drug benefit businesses after the Trump White House reversed course on drug pricing policy.

The Trump administration only months ago said eliminating drug rebates would go a long way to reducing the cost of prescription drugs that the government buys for millions of Americans and seniors with Medicare Part D drug coverage in particular.

But that all ended when the White House decided to instead leave drug pricing measures to Congress and the hope lawmakers can come to a bipartisan agreement heading into the 2020 election year. Drug makers have already dodged a Trump administration effort that failed to get companies to advertise prescription prices.

The rule Trump withdrew would’ve ended rebates paid to health plans and pharmacy benefit managers, known as PBMs, which are middlemen between drug makers and consumers when it comes to purchasing drugs and providing prescription coverage. The PBM’s role is in part to leverage its negotiating clout to get the best drug prices on behalf of its diverse base of customers that include large employers as well as Medicare and Medicaid.

But the PBM’s role has come under fire with some questioning whether they pass along as much savings as they could to patients, consumers and taxpayers. Trump’s policies were thought by some to lead to more price transparency and a better understanding of the PBM’s role, which is already changing as they are gobbled by health insurance companies.

“We’re very much eliminating the middlemen,” Trump said of his administration’s proposed “American Patients First” blueprint to lower prices unveiled last year. “The middlemen became very, very rich. Right?”

“Whoever those middlemen were — and a lot of people never even figured it out — they’re rich,” Trump said last year. “They won’t be so rich anymore.”

Wall Street doesn’t seem to think health insurers will be less rich now with the share prices of big health insurers that own PBMs soaring on Thursday. Cigna, which owns the big PBM Express Scripts, saw the price of its shares jump $14 on Thursday afternoon while UnitedHealth Group, which owns the PBM OptumRx, saw the price of its shares jump more than $12 per share. And CVS Health, which owns the Caremark PBM, and Humana, which owns its own PBM, also saw big increases Thursday in the price of their shares.

But health plans and PBMs said the rules Trump and his team, including U.S. Secretary of Health and Human Services Alex Azar were pursuing were going to backfire in the form of higher premiums paid by Americans.

The Better Medicare Alliance, which represents CVS Health, Humana and UnitedHealth Group said the proposed rebate rule “would have had the harmful effect of increased premiums or reduced benefits for millions of beneficiaries in Medicare Advantage.”

Health insurers reasoned an end to rebates merely “takes out negotiated savings without requiring drug makers to lower their prices,” according to information health insurers submitted to the White House and Congress.

America’s Health Insurance Plans, the lobby for health insurers that own PBMs including Cigna, Anthem and Centene, say the proposed Medicare Part D “safe harbor rebate rule” would have increased the cost or premiums paid by seniors and, in turn, increased costs to taxpayers by 25%, or nearly $200 billion.

The answer, health plans say, is for the Trump administration and Congress is to turn to where drug prices are set in the first place. And that’s to the pharmaceutical industry.

“Prescription drug prices are out-of-control, and we must work on solutions to reduce the price and cost of prescription drugs for all Americans, including seniors and taxpayers,” said Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP). “As we all know, drug prices and price increases are set and controlled solely by drug makers. They alone could decide to reduce prices – and can do so today.”

Meanwhile, the pharmaceutical industry said the Trump White House blew a good chance to make a difference in the cost of prescriptions for seniors.

“The Administration’s decision to not move forward on the proposed rule to reform the rebate system in Medicare Part D is a blow to seniors who could have paid less for their medicines at the pharmacy counter,” said The Pharmaceutical Research And Manufacturers of America (PhRMA), which represents big drug makers including Abbvie, Pfizer, Merck & Co. and Johnson & Johnson.

“Of all the policies proposed in Washington right now, this was the only proposal that would provide immediate savings at the pharmacy counter, instead of only saving the government or insurance companies money,” PhRMA said. “It is disappointing that despite support from policymakers on both sides of the aisle and from a wide array of consumer, patient, pharmacist and provider groups that they have decided to backtrack.”

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