The rebate plan for Medicare recipients was crafted by Health and Human Services Secretary Alex Azar – at left with President Trump on Wednesday – but ran into opposition from White House budget officials. Alex Brandon/Associated Press
WASHINGTON — After two setbacks this week, President Trump is now focusing his drive to curb drug costs on congressional efforts aimed at helping people on Medicare and younger generations covered by workplace plans.
The White House on Thursday yanked its own regulation to ease the financial bite of costly medications for those on Medicare by letting them receive rebates that drugmakers now pay to insurers and middlemen. A congressional agency’s estimate that the plan would have cost taxpayers $177 billion over 10 years seemed to seal its fate.
Earlier a federal judge ruled that the administration lacked the legal authority to require drugmakers to disclose list prices in their TV ads. The ruling Monday blocked a highly visible change expected to have started this week.
Both price disclosure and the rebate idea were part of a strategy on drug costs that Trump announced at the White House with much fanfare last year.
“This is a big setback,” said Peter Bach, director of the Center for Health Policy and Outcomes at New York’s Memorial Sloan Kettering Cancer Center. The rebate rule “was not good policy (since) it would have increased spending on prescription drugs even if it mildly reduced out-of-pocket costs in some cases. But nevertheless this was a cornerstone of the blueprint.”
White House spokesman Judd Deere said the rebate proposal was withdrawn “based on careful analysis and thorough consideration.”
Deere said Trump is not backing away from his promise to lower drug prices, and the administration is setting its sights on bipartisan legislation. One idea would cap drug co-pays for people with Medicare, which would produce savings for seniors taking costly drugs. That’s another way to achieve a similar goal as the rebate plan.
“The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” Deere said in a statement.
While agreeing it’s a setback for Trump, John Rother of the National Coalition on Health Care said that if legislation could be worked out, “that might actually lead to a better outcome.” His organization is an umbrella group that represents a cross section of business and consumer groups.
The chairman of the Senate Finance Committee, Charles Grassley of Iowa, and the committee’s top Democrat, Sen. Ron Wyden of Oregon, are trying for a compromise centered on lowering drug costs for government programs such as Medicare and Medicaid. Top administration officials this week participated in a closed-door meeting between Grassley and Republican senators on his committee.
Grassley said in a statement that he had concerns about the administration’s rebate rule, but was confident about the prospects for legislation. “While the final details are still being negotiated, we’re on track to report a bill out of committee very soon,” he said.
Separately, Grassley and Illinois Sen. Dick Durbin, the chamber’s second-ranking Democrat, are pushing legislation that would grant the government the power to require drug companies to disclose their prices in consumer advertising.
House committees are also working on legislation and Speaker Nancy Pelosi, D-Calif., remains in contact with the White House on a drug cost compromise. Changes to Medicare often have an impact on employer insurance, but the main dividend for working families could come from legislation to promote pharmaceutical competition.
The rebate plan was crafted by Health and Human Services Secretary Alex Azar but ran into opposition from White House budget officials. That pushback stiffened after the nonpartisan Congressional Budget Office estimated that the plan would have little effect on manufacturer prices and would cost Medicare $177 billion over 10 years by leading to higher premiums subsidized by taxpayers.
Trump’s reversal on rebates was a win for insurers and middlemen called “pharmacy benefit managers” who administer prescription drug plans for large blocks of insured patients.
It was a defeat for the pharmaceutical industry, which had lobbied to promote rebates. Drugmakers prefer that to other approaches lawmakers are considering. Those include “inflation rebates” that drugmakers would pay directly to Medicare if they raise prices beyond a yet-to-be-determined measure.
“The administration has abandoned one of the only policy solutions that would have truly lowered what patients are forced to pay out of pocket for the medicines they need,” Jim Greenwood, head of the Biotechnology Innovation Organization, said in a statement.
Shares of pharmaceutical companies dropped Thursday but drugstore chains and insurers gained. Drugmaker Merck & Co. dropped 4.5 percent while UnitedHealth climbed 5.5 percent and CVS Health gained 4.7 percent.
Rebates are a largely unseen part of the complex world of drug pricing.
Under the administration’s plan, drugmaker rebates now paid to insurance companies and their middlemen would have gone directly to seniors in Medicare’s Part D program when they filled their prescriptions.
But congressional analysts concluded that drug companies were unlikely to lower list prices across the board in response to the plan. Meanwhile, insurers would raise premiums to compensate for the loss of rebates.
Labor Department data indicate that changes may be afoot with drug prices.
Overall prescription drug inflation seems to have stabilized, with more monthly declines than increases recently. The White House credits Trump for that change, but independent experts say the trend isn’t totally clear yet.
The administration’s rebate reversal was first reported by Axios.
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