Alex Azar says prescription drug rebate plan gives savings to patients

The Trump administration on Thursday said it wants prescription-drug rebates that are extended to obscure middlemen in the supply chain to be passed directly to patients instead.

The Department of Health and Human Services says its proposed shakeup of legal protections that guide the rebates would allow discounts of up to 30 percent to be taken off what seniors in Medicare Part D and poorer Americans in Medicaid managed-care pay from their pocket at the pharmacy counter.

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need,” said HHS Secretary Alex M. Azar II.

President Trump is pushing the proposal as part of a wider pricing blueprint designed to drive down the cost of prescription drugs.

Rising costs are a major concern for voters, so the White House and members of both parties in Congress are devising ways to shake up the system. The move also gives Mr. Trump another talking point ahead of his State of the Union address to Congress on Tuesday.

The proposed rule would scrap what is known as “safe harbor” protection under a federal anti-kickback law for rebates that are paid from drug manufacturers to pharmacy benefit managers, or “PBMs” and plans operating under Medicare and Medicaid. PBMs are the middlemen between insurers and drug companies that negotiate discounts for consumers.

Officials say it’s often not clear how much benefit patients derive from the secretive negotiations, and drug makers often set higher list prices to offer bigger rebates, benefiting everyone except patients.

Instead, HHS’s proposal would create legal protections for rebates that are passed directly to patients at the pharmacy counter and to fixed-fee arrangements between drug makers and PBMs, so manufacturers aren’t tempted to raise prices.

This way, “if anyone is getting a discount, it is the patient,” a senior administration official said.

“Every day, Americans — particularly our seniors — pay more than they need to for their prescription drugs because of a hidden system of kickbacks to middlemen,” Mr. Azar said. “President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy.”

HHS wants to implement its rule by 2020 but it could take effect within 60 days of finalization.

The main lobby for PBMs said they’ve done a good job negotiating rebates, so the administration shouldn’t upset the apple cart.

“PBMs keep coverage affordable by negotiating rebates with drugmakers, which are used to enhance benefits and reduce beneficiary cost sharing and premiums,” said Pharmaceutical Care Management Association (PCMA) President and CEO JC Scott. “Part D premiums have remained lower than initially projected since the program began and enrollees are highly satisfied with their prescription drug coverage.”