In what may turn out to be very good news for independent pharmacies nationwide, the Trump Administration last week followed through on proposals first laid out in its “American Patients First” blueprint to adopt measures to restrict the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebates.

On January 31, the U.S. Department of Health and Human Services (HHS) proposed a rule to lower prescription drug prices and out-of-pocket costs for Medicare Part D beneficiaries by eliminating the Anti-Kickback safe harbor for rebates paid to Part D plans, Medicaid managed care organizations, and pharmacy benefit managers (PBMs).  The rule proposes that manufacturers instead pass cost-savings directly to patients with transparent drug pricing at the point of sale, creating a new safe harbor that excludes the middleman. The proposal also creates a safe harbor for fixed fee service arrangements between manufacturers and PBMs.

In an HHS release, Secretary Alex Azar said, “This historic action, combined with other administrative and legislative efforts on prescription drug pricing, is a major departure from a broken status quo that serves special interests and moves toward a new system that puts American patients first. Democrats and Republicans looking to lower prescription drug costs have criticized this opaque system for years, and they could pass our proposal into law immediately.”

HHS reasons that the current rebate system actually serves as a disincentive to manufacturers to lower drug prices. There is certainly evidence that suggests that drug prices on are the rise, at least partially, due to the rebates that are often demanded by PBMs, which in turn lead manufactures to increase the list price to offset the rebates.

In addition, HHS notes that the rebate system negatively impacts the use of generic and biosimilar drugs that are just as safe and effective as branded drugs. Manufacturers and PBMs crowd out lower-priced competition by building “rebate-walls” that place branded drugs, with large rebates but much larger list prices, ahead of generics on formularies. The proposed rule seeks to end this practice and increase completion in the marketplace for generics and biosimilar drugs.

Though there is currently no firm effective date, the Administration is setting its sights on implementation of the new rules by 2020.

The FisherBroyles Pharmacy and Health Care Law team is pleased to keep you updated on events of interest to those in the healthcare, medical device, and pharmaceutical industries. Questions may be directed to any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson
brian.dickerson@fisherbroyles.com
202.570.0248

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci
Anthony.calaunci@fisherbroyles.com
419.376.1776

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid
nicole.waid@fisherbroyles.com
202.906.9572

Amy Butler, FisherBroyles Partner
Amy Butler
amy.butler@fisherbroyles.com
419.340.8466

 

FISHERBROYLES.COM

T HE N E X T  G E N E R AT I O N  LA W F I RM ®