White House kills rule aimed at ending Medicare drug rebates

Heap of medical pills in white blue and other colors. Pills in plastic package. Concept of healthcare and medicine

The Trump administration on Thursday credited its leadership for the first drop in prescription drug costs in more than four decades, according to a White House statement. Those include "inflation rebates" that drugmakers would be pay directly to Medicare if they raise prices beyond a yet-to-be-determined measure.

The Trump administration on Wednesday abandoned one of its signature drug-pricing efforts: a ban on numerous rebates that drug companies pay to pharmacy benefit managers under Medicare.

The rule would have forced healthcare companies like Cigna and CVS Corp to forgo these discounts or pass them onto Medicare patients through their health insurance plans and drug plans.

On Monday, a federal judge ruled the Department of Health and Human Services overstepped its authority with its plan to force drugmakers to disclose list prices in advertisements.

The administration's about-face was the second setback in a week for the president's drive to lower drug prices. CVS Health Corp. and Cigna Corp. both jumped more than 7 percent, and UnitedHealth Group Inc. rose 4 percent while broader markets advanced slightly at the start of trading. He said that the administration was encouraged by bipartisan discussion on legislation to control drug costs. Drugmakers preferred the consumer rebate approach to other ideas that lawmakers are considering.

The proposals are all aimed at lowering the cost of prescription medicines in the U.S., which are among the highest in the world and have risen well above inflation in recent years, and have become something of a flagship campaign for Trump. The drug industry trade group PhRMA called the rollback of the plan "a blow to seniors who could have paid less for their medicines at the pharmacy counter".

The now-scrapped proposal would have banned PBMs - or intermediaries who negotiate between drug manufacturers and insurance plans - from collecting portions of drug rebates for themselves as profit.

The government had hoped that by eliminating rebates of 15 percent to 30 percent, or more, of a drug's listed price, the prices would fall. The pushback grew after the nonpartisan Congressional Budget Office estimated the plan would have little impact on manufacturer prices and cost Medicare $177 billion over 10 years by leading to higher premiums subsidized by taxpayers.

"Only drug manufacturers have the power to set drug prices".

Grassley said in a statement that he had concerns about the administration's rebate rule, but was confident about the prospects for legislation. The government's inflation index for medications also includes prices for lower-cost generics, and most consumers are anxious about high-priced brand drugs. Moreover, last week the president announced his intentions to deliver an executive order that would create a "favored nations" clause, where US spending for drugs would be tied to prices paid by other countries.

Azar told reporters Thursday that he is working with the White House on other ideas to lower drug prices, including finding ways to import lower-cost drugs from other countries. "At the end of the day, while we support the concept of getting rid of rebates ... we're not going to put seniors at risk of their premiums going up", he said. So as far as drug price rebates go, there will be no change because of this White House reversal.

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