BMA in the News
July 15, 2019

White House Cedes Battle, but Not War, Against Drug Rebates

HHS Secretary said he hopes Congress will consider taking action

by Joyce Frieden, News Editor, MedPage TodayJuly 11, 2019

WASHINGTON — The Trump administration isn’t giving up on getting rid of drug rebates to pharmacy benefit managers or insurers to instead give negotiated discounts directly to consumers, Health and Human Services (HHS) Secretary Alex Azar said Thursday.

“The president is deeply committed to protecting America’s seniors,” Azar said at a press briefing with reporters at HHS headquarters. “He does not want any risk that our actions could cause seniors’ premiums to increase.”

Azar’s remarks came a day after the administration confirmed that it was withdrawing a proposed rule that would have required drug company discounts — with some exceptions — to go directly to consumers. The rule, first proposed in February to apply to Medicare and Medicaid, would have required that any discounts received by pharmacy benefit managers as rebates be passed directly on to Medicare and Medicaid beneficiaries when they received their prescriptions.

The risk of a premium increase under the plan “was a known risk in our proposal and why we put this rule out for public comment … [We put] three different actuarial analyses out there as part of it to get feedback,” Azar said. “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.”

The agency isn’t abandoning the idea, Azar added. “[This] doesn’t change our views about rebates. Congress might take this up; they have more tools than we do, and they can look more holistically at changes to the system that could protect seniors from bearing any impact of change.”

Azar painted the withdrawal as a victory of sorts. “We’ve totally changed the debate on rebates. The commercial space is already moving away from rebates and to up-front discounts for patients. Rebates’ days are numbered.”

Reaction to the rule’s withdrawal was mixed.

“The Better Medicare Alliance applauds the administration’s withdrawal of the proposed rebate rule in Part D which would have had the harmful effect of increased premiums or reduced benefits for millions of beneficiaries in Medicare Advantage,” Allyson Schwartz, the group’s president and CEO, said in a statement. “We share the administration’s goal of lowering prescription drug out-of-pocket costs for consumers and believe that action to reduce costs should address the root cause of high prescription drug prices.”

Public Citizen’s Health Research Group had a different take, noting that a federal judge recently ruled against another proposed regulation that would have required drugmakers to display list prices for drugs in their TV ads.

“Now that two of the administration’s signature drug pricing efforts have come to an end, it’s time to push for real solutions by advancing direct government drug pricing negotiation, stopping price spikes, and taking on the monopoly power of prescription drug corporations,” said Steve Knievel, Public Citizen’s advocate for its Access to Medicines Program, in a statement.

The rebate issue was one of several Azar addressed during a question-and-answer session with reporters. Azar also was asked how the administration’s plan to eradicate AIDS in the U.S. by 2030 fits in with its proposed removal of transgender persons from the class of people protected from discrimination by healthcare providers. Azar said the removal of transgender people from the protected class was not an intentional decision — “we’re simply trying to comply with laws written by Congress. We strongly believe everybody should have access to healthcare.”

MedPage Today asked about whether the administration thought physicians were interested in accepting more financial risk, as some might under a proposed change in reimbursement for physicians who provide kidney disease care.

“When we do our [payment] models, our goal is to offer a holistic solution … that everybody can participate in, regardless of size” of the practice, said a senior administration official, who was also at the press briefing but spoke on background. “Our models are divided into two broad camps: bigger physician groups that have the financial ability to take full accountability; and the other one is the single primary care physician [or specialist] … The way we set those [smaller-group] models is asymmetric; they have a much bigger upside than a downside.”

In one model, a primary care physician who accepts downside risk would lose at most 10% of their revenue, he continued. Physicians “have a revenue cycle right now, and they’re paying an 8%-to-10% cost to collect on that revenue cycle. So the way we try to work this out is to say, ‘Hey look, you have a guaranteed downside right now with the revenue cycle. If you move to this model that is outcomes-based, we’re eliminating this revenue cycle … So in a worst-case scenario — you’re performing poorly outcomes-based, you kind of end up the same. In a best-case scenario, you’re making a lot more money.'”

In response to another question, Azar said he was frustrated that much of the discussion around improving the healthcare system was dominated by the Affordable Care Act. “I believe it hurts a lot of people, but it is a portion of healthcare … we need to take the discussion to healthcare for all Americans.”

Azar said he and his team have an “alternative vision” for the healthcare system. For example, “180 million people have private health insurance through their employers and other group settings — take what works [there] and make it better for them,” he said. “And 60 million Americans in Medicare are happy with what they have. Take what works for them and make it better.”

He also emphasized having “ironclad federal-level protection for those with preexisting conditions.”

One reporter asked Azar how much longer he planned to stay at HHS. “I’m delighted to stay in this role for as long as the president is in office and the president wishes me to be here,” he replied. “I love this job and I love this department.”


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