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Costs For Taxpayers Could Skyrocket Under Proposed Rebate Rule

posted by AHIP

on April 8, 2019

WASHINGTON, D.C. –  Today concludes the comment period for a new rule proposed by the Department of Health and Human Services (HHS) that would eliminate a negotiating tool holding down drug prices for seniors. Expressing serious concerns about the proposal, America’s Health Insurance Plans (AHIP) submitted a comment letter detailing how the rule would hurt seniors, increase premiums, and raise taxpayer spending – all to create a windfall for pharmaceutical companies. And the consequences could be far worse than previously thought.

AHIP commissioned Avalere Health to model three scenarios based on the Office of the Actuary’s (OACT) assumptions in the proposed rule to understand the impact on premiums and government costs if drug makers keep a larger portion of current rebate dollars than what HHS expects. According to the analysis, premiums for seniors could rise as much as 40%, if manufacturers retain 50% of current pricing concessions; and government costs could increase by more than $410 billion for drugs. With the release of today’s comment letter including these new data, AHIP’s Executive Vice President of Policy and Strategy Keith Fontenot released the following statement:

The question isn’t whether costs will go up, but by how much. The numbers are eye-popping, and the administration should hit the brakes on this proposal. We should not force taxpayers to pay tens of billions more to fund a giveaway to Big Pharma.

Placing Bets on What Big Pharma Will Do

The proposed rule would eliminate rebates in the Part D program that Pharmacy Benefit Managers (PBM) use to negotiate lower prices from drug makers. It relies on the hope that drug makers will lower prices on their own if no longer forced to negotiate with PBMs. But, there’s nothing to prevent Big Pharma from keeping far more than that, or from padding their bottom line with the all the savings.

According to official estimates by the HHS’s own Office of the Actuary (OACT), the proposed rule would increase premiums in Medicare Part D by 25%. Costs to taxpayers would go up $200 billion, while pharma companies would see a $100 billion windfall.

Click below to view the full press release