Rebates

On February 1st, 2019, the Department of Health and Human Services announced a proposed new rule to lower drug prices by excluding from safe harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to PBMs. The rule would effectively get rid of most rebates unless they are passed on to health plans and consumers and really used to lower drug costs. The Department of Health and Human Services asked for comments on this proposal. This is an excellent reform that will lower prescription drug costs, help ensure that rebates are passed on to consumers, and curb PBM abuses and anticompetitive behavior.

Below are a number of comments in support of HHS's rule to eliminate the safe harbor for most PBM rebates:

Our comments on behalf of Consumer Action, Consumer Federation of America, Consumer Reports, NETWORK Lobby for Catholic Social Justice, and U.S. PIRG in support of getting rid of most rebates. Submitted on April 8, 2019

Families USA's comments in support of the proposed rule. Submitted on April 8, 2019

AARP's comments against the proposed rule. Submitted on April 8, 2019

Kaiser Permanente's comments on the proposed rule. Submitted on April 8, 2019

National Psoriasis Foundation's comments on the proposed rule. Submitted on April 8, 2019

Alliance For Safe Biologic Medicines' comments in support of the proposed rule. Submitted on April 8, 2019

Association for Accessible Medicines' comments in support of the proposed rule. Submitted on April 8, 2019

Mylan comments on the proposed rule. Submitted on April 8, 2019

Pfizer comments on the proposed rule. Submitted on April 8, 2019

Rebates are the elusive manipulator of drug prices. PBMs were intended to participate in the pharmaceutical supply chain as administrators and negotiators operating in the best interest of patients; however, rebates have incentivized PBMs to pursue profits from prescription drug sales rather than service fees. A drug's list price is proportional to its rebate and co-pay value. Therefore, PBMs are more likely to choose higher list price drugs in their negotiations, which are more expensive ​for patient co-pays, because they can recoup a larger rebate. Currently, there is no legal obligation for PBMs to pass on rebate savings to patients, leading PBMs to pocket large sums of money that are often advertised as being passed on to consumers. There are a variety of solutions have been proposed by people concerned about this inverted incentive structure.

 

One solution would be fiduciary duty, requiring PBMs to advocate in the best interest of their beneficiaries. Some groups believe that a fiduciary duty should be instituted between PBMs and covered entities (healthcare providers), others believe it should be between PBMs and covered individuals (patients).

 

Another solution would be the restriction or removal of rebates entirely, dismantling any potential financial gain that could urge a provider to harm patients by choosing more expensive medication. Alternately, there is growing research around the potential implementation of value-based pricing to replace rebates.

The use of rebates and their impact on pricing is currently being scrutinized as part of the President's plan.

On rebate walls: Pfizer's complaint against Johnson & Johnson

The opinion by the court denying the motion to dismiss the case against Johnson & Johnson

Shire's complaint against Allergan

Shire v Allergan opinion

Links

Here are some of our writing as well as additional works by other writers and departments preoccupied by the effects of PBM rebates.