HHS seeks to end 'backdoor deals' to lower drug prices

Under a proposed rule HHS released Jan. 31, drug manufacturers would no longer be able to give rebates to pharmacy benefit managers, but they would be allowed to offer discounted prices directly to consumers.

Four things to know:

1. Under the current system, drug manufacturers set a price for their products, and pharmacy benefit managers negotiate a discount in the form of a rebate on behalf of insurance companies. The rebates manufacturers pay to pharmacy benefit managers would be viewed as illegal kickbacks under the proposed rule.

"The HHS proposal would expressly exclude from safe harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to pharmacy benefit managers (PBMs), Part D plans and Medicaid managed care organizations," states a press release from HHS.

2. The proposed rule would create a new safe harbor for prescription drug discounts manufacturers offer directly to patients, as well as fixed-fee service arrangements between manufacturers and pharmacy benefit managers.

3. "Every day, Americans — particularly our seniors — pay more than they need to for their prescription drugs because of a hidden system of kickbacks to middlemen," said HHS Secretary Alex Azar. "President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy."

4. The proposal could substantially lower out-of-pocket drug costs for consumers. However, the proposed changes could lead to higher premiums if insurance plans raise prices to help offset loss of revenue from drug rebate payments, according to The New York Times.

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