The White House has said it is committed to making health care more affordable, with lower drug prices central to that promise. But this week, the Trump administration reversed its position on reforming the drug rebate system that it had suggested would have decreased the cost of medications.
Under the prescription drug rebate model, drug manufacturers give discounts, or rebates, to pharmacy benefits managers, or PBMs, who negotiate on behalf of insurance companies for medication prices. PBMs hand over most of that rebate to insurers, who then pass along savings to consumers as reduced health premiums. The whole process is often criticized for its lack of transparency.
So what does the government’s reversal mean for those concerned about high drug prices? It could be a good thing, analysts and advocates say. Here’s what the White House and health policy experts are saying about the significance.
What the Trump administration proposed
Rebates are not a new target for criticism in the debate over prescription drug prices.
Earlier this year, the Trump administration asked Congress to scale back the complicated drug rebate system. Under Trump’s plan, consumers would receive the money that would have otherwise gone to drug manufacturers.
On Feb. 1, Health Secretary Alex Azar told PBS NewsHour’s Judy Woodruff that “these rebates are a percent of the list price” for medications produced by drug manufacturers.
The Trump administration has wanted older Americans to get to keep those dollars, instead of giving them to the pharma industry by paying for prescriptions.
“The vast majority of seniors are going to do better out of pocket by saving money” with this change, Azar said in February.
He suggested that if an older American paid $300 for a drug at the pharmacy, they would receive a more than 30-percent discount of $100 dollars.
During a Feb. 27 congressional hearing, chief executives from major pharmaceutical companies — AbbVie, AstraZeneca, Bristol-Myers Squibb, Janssen Pharmaceuticals, Merck, Pfizer and Sanofi — roundly blamed pharmaceutical benefits managers for using rebates to artificially bloat drug prices. Pharmaceutical executives agreed change was needed.
But Edwin Park, a research professor at Georgetown University McCourt School of Public Policy, said the math wouldn’t have added up for many patients. By his estimates, this rule could have led to a $10.5 billion rise in federal and state Medicaid costs over a decade’s time, potentially costing Americans more than they would have benefitted.
“For the average consumer, it wouldn’t have affected list prices or pharmacy costs at the counter unless you were a Medicare beneficiary or using certain drugs,” he said. “There may have been better approaches to lower out-of-pocket costs than what this rule proposed to do.”
Why is the Trump administration bailing now?
The Trump administration on Thursday credited its leadership for the first drop in prescription drug costs in more than four decades, according to a White House statement. That decline, plus ongoing bipartisan talks to produce legislation to lower “outrageous drug costs,” reportedly led to President Donald Trump to say the changes to rebates were no longer necessary because other policies were in place.
“Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” said White House spokesperson Judd Deere in an emailed statement to the PBS NewsHour.
Going forward, “President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” Deere said.
And according to the Department of Health and Human Services, Trump and Azar will continue to “take bold action” to stop other countries from unfairly benefitting from drug research and development in the U.S., “examine how to safely import lower-cost prescription drugs, [and] empower patients with meaningful transparency.”
What does that mean for consumers?
The current rebate system must be made more transparent, said David Blumenthal, president of the Commonwealth Fund, but “it was never clear that this rule would have actually lowered prices for consumers.”
Trump’s proposed rule “did not address the fundamental causes of exorbitant drug prices in the U.S.,” Blumenthal said in an email to the PBS NewsHour. So as far as drug price rebates go, there will be no change because of this White House reversal.