Advocacy on consumer healthcare competition issues aimed at lowering prescription drug costs
Consumer Groups Submit Comments in Support of HHS's Proposed Rule to Lower Drug Prices By Eliminating Safe Harbor for PBM Rebates
April 11, 2019
This Monday, April 8th, consumer groups submitted comments in support of the Department of Health and Human Services's proposal to lower prescription drug costs by eliminating the safe harbor rule for most rebates paid to pharmacy benefit managers (PBMs) and organizations, and requiring that the remaining rebates be passed on to consumers at the point of sale.
The comments were submitted on behalf of Consumer Action, Consumer Federation of America, Consumer Reports, NETWORK Lobby for Catholic Social Justice, and U.S. PIRG. The main points are:
The PBM market is not competitive, transparent, well-regulated, and numerous conflicts of interest exist, which creates a fertile environment for PBMs to engage in behavior that escalates list prices and out of pocket costs for consumers.
The perverse incentives of rebates leads to higher costs being imposed, significantly increasing costs to the most vulnerable Medicare beneficiaries. Drug companies pay massive rebates to obtain a preferred position on formularies based on pays the highest rebate payment. Rebates encourage the usage of more expensive brand drugs, discourage the use of lower cost generics and biosimilars, and increase the out of pocket costs of seniors.
Implementation of the proposed rules will result in an improved alignment of incentives that will reduce out of pocket costs to patients, lower costs to the federal government, lower the list prices for newly launched drugs, cause some positive spillover effect in the commercial market, improve transparency, and encourage the use of lower cost generic and biosimilars.
Thousands of comments were submitted on the proposed rebate rule, which if approved by the Department of Health and Human Services, is scheduled to go into effect in 2020. Drug manufacturers pay substantial rebates to PBMs in order to get better placement on their formularies, and the rebates are often not passed on to consumers. This proposal would eliminate rebates unless they are actually used to lower drug prices. It will be an important step toward reducing prescription drug costs, making the drug supply chain more transparent and accountable, and ensuring that PBMs actually lower drug prices and negotiate better deals, instead of contributing to higher drug costs and taking substantial cuts for themselves.