HHS Secretary: We have the power to eliminate rebates

Despite opposition from pharmacy benefit managers, HHS Secretary Alex Azar said his agency has the power to eliminate prescription drug rebates — a key element in the prescription medicine cost debate, Reuters reports.

These rebates, which drugmakers pay to PBMs, are negotiated by PBMs to lower the costs of medicines for their clients. These discounts are often confidential and have recently become controversial. Pharmaceutical companies claim these rebates force them to raise the list price of their medications to protect their bottom lines. PBMs argue that they pass on these savings to their clients and the responsibility for high drug prices lies with the manufacturers who set those prices.

The Trump administration has been receptive to the drugmakers' view that rebates created a perverse incentive to raise drug prices.

In July, HHS proposed removing or altering safe harbor protections for pharmaceutical company rebates. Safe harbor protections shelter drugmaker rebates made to PBMs from antikickback statutes.

The PBM industry challenged the proposal, saying HHS can't eliminate rebates on its own and would need Congress to change the federal statute.

Mr. Azar contends that the agency has the power to eliminate these rebates. "What one has created by regulation, one could address by regulation," he said.

Read the full report here.

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