The Trump administration finalized a rule Friday that gets rid of the safe harbor shielding Medicare Part D rebates from the anti-kickback statute and a rule that will tie certain Medicare Part B drug prices to those paid by countries overseas.
Trump called for both rules to be published during a flurry of executive orders back in September. The rebate rule is expected to generate significant pushback from providers, payers and pharmacy benefit managers (PBM) that say it will harmfully impact seniors' access to cheaper drugs. The so-called most-favored-nation rule will also change how providers get paid for administering and storing Part B drugs.
The rebate rule will replace the safe harbor for Part D rebates, meaning they could be targeted under the federal anti-kickback law, with a new safe harbor that applies only to discounts offered at the point of sale.
The goal is to curb the use of rebates in Medicare Part D, which Health and Human Services Secretary Alex Azar has described as a "kickback" that drug companies must give to pharmacy benefit managers and insurers in order to get on their plan formularies.
HHS put out a proposed rebate rule in 2018 and it generated intense pushback from the insurer and PBM industry. The industries complained the rule will raise premiums for Part D seniors, pointing to a report from the Centers for Medicare & Medicaid Services' actuaries that the rule would lead to a 19% hike in premiums.
A report commissioned by the PBM industry group Pharmaceutical Care Management Association said that the rule would also hike federal spending and is unlikely to lower prices.
Payers and PBMs are worried that the rule would remove a key negotiating tool that they have with drug companies to ensure lower prices. In turn, the pharmaceutical industry has been a major proponent of the rule.
Rebates have generated PBMs and insurers a lot of money. A 2018 analysis from the consulting firm Altarum found that insurers got $89 billion in rebates from drug companies in 2016.
The threat of premium hikes to seniors was a major reason the White House scuttled the rule last year and its revival is a boost for Azar, who has complained that PBMs don't pass on the savings from rebates to beneficiaries.