DOSE OF REALITY: REBATE RULE WOULD HAND BIG PHARMA A MASSIVE BAILOUT AT TREMENDOUS COST TO SENIORS & TAXPAYERS

Policymakers Should Focus On Market-Based Solutions To Hold Drug Companies Accountable As The Pharmaceutical Industry Continues to Hike Prescription Drug Prices Through the Pandemic

BIG PHARMA’S PRICE HIKES CREATED A CRISIS OF AFFORDABILITY

Prescription drug prices are out-of-control thanks to the anti-competitive tactics and price-gouging practices of Big Pharma. Despite an escalating crisis of affordability, made worse by the economic impact of the COVID-19 pandemic, brand name drug companies continue increasing prices and fighting to evade responsibility.

In the midst of America’s battle against the pandemic, Big Pharma hiked prescription drug prices — increasing prices on at least 42 brand name drugs in the first week of July 2020 alone. In January of this year, Big Pharma hiked prices on more than 600 drugs by an average of 5.2 percent. Last summer, Big Pharma hiked prices on 104 drugs by an average of 13.1 percent. Over five years, Big Pharma has raised the price of brand name drugs at 10 times the rate of inflation.

Engaging in price hikes during a pandemic, while receiving billions of dollars from taxpayers to help develop COVID-19 treatments, demonstrates why policymakers must act to hold Big Pharma accountable — and why now is NOT the time to revisit or implement the misguided Rebate Rule that would hand Big Pharma a bailout at the expense of American patients, seniors and taxpayers.

THE REBATE REBUTTAL: A BAILOUT FOR BIG PHARMA PAID FOR BY SENIORS AND TAXPAYERS

In January 2019, the U.S. Department of Health and Human Services (HHS) introduced a misguided proposal, known as the Rebate Rule, that would eliminate a key negotiating step that serves as the only real check on the pharmaceutical industry’s unilateral control over prices.

On July 11, 2019, the administration pulled the plug on the Rebate Rule:

The administration made the right call last year to halt this policy. If implemented, the Rebate Rule would:

• Increase Premiums On American Seniors And Patients With Disabilities By Between 25 and 40 Percent: Analysts at the Congressional Budget Office (CBO), Centers for Medicare and Medicaid Services (CMS) and Avalere Health all agree that under the Rebate Rule, Medicare Part D premiums would increase between 25 and 40 percent. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19; Congressional Budget Office, Incorporating The Effects Of The Proposed Rule On Safe Harbors For Pharmaceutical Rebates In CBO’s Budget Projections, 5/2/19; Avalere Health, Costs for Taxpayers Could Skyrocket Under Proposed Rebate Rule, 4/8/19)
• Cost American Taxpayers Between $200 Billion and $400 Billion Dollars: Analysts at the CBO, CMS and Avalere Health all agree the proposed rule would come at a tremendous cost to American taxpayers, with a price tag ranging from nearly $200 billion to more than $400 billion from 2020 to 2029, making it one of the most expensive regulations in U.S. history. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19; Congressional Budget Office, Incorporating The Effects Of The Proposed Rule On Safe Harbors For Pharmaceutical Rebates In CBO’s Budget Projections, 5/2/19; Avalere Health, Costs for Taxpayers Could Skyrocket Under Proposed Rebate Rule, 4/8/19)
• Hand Big Pharma A $137 Billion Bailout – Rewarding Drug Companies’ Price Hikes And Anti-Competitive Tactics: Government analysis finds that under the rule, Big Pharma will keep the dollars they currently pay in rebates and use the rule as an opportunity to line their own pockets with an increased $137 billion in overall drug spending – a bailout rewarding their anti-competitive and price-gouging behavior — at a time when the industry is already receiving billions of dollars in support for research and development of COVID-19 treatments and vaccines. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)
• Do Nothing To Lower Out-Of-Control Prescription Drug Prices: Government actuaries predict drug manufacturers will keep at least 15 percent of what they would have offered in rebates, in order to offset their increased share of covering the Medicare Part D “donut hole” as outlined in the Bipartisan Budget Act of 2018. Further, actuaries forecast drug prices increasing before finally leveling off, but do not foresee prices decreasing. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)
• Increase Out-Of-Pocket Costs For Medicare Part D Beneficiaries: While there is widespread agreement the Rebate Rule would increase premiums, there is also the potential it would actually also increase out-of-pocket costs. In fact, analysts at Avalere Health found the Rebate Rule could increase out-of-pocket costs for Medicare Part D beneficiaries by as much as $36.5 billion. (Avalere Health, Costs for Taxpayers Could Skyrocket Under Proposed Rebate Rule, 4/8/19)

REBATE RULE RISK

When seven pharmaceutical executives appeared before the U.S. Senate Committee on Finance in February 2019, Chairman Chuck Grassley (R-IA) pointedly asked the companies whether they would “commit to lowering [their] drug prices” should the Rebate Rule be finalized. The executives’ answers were laced with qualifiers from “that definitely would be my goal” to “we would try to” and even complete pivots such as, “[l]owering list price has to be linked into better access and affordability at the counter for the patients.”

Their answers underscored a key flaw in the premise of the rebate rule: Nothing in the rule guarantees drug makers will lower list prices by the full amount of existing rebates, alter how they price prescription drugs or stop the industry’s never-ending price hikes. In fact, the elimination of rebates would hand more power to drug makers to unilaterally determine price.

EXPERTS, INDUSTRY LEADERS AND JOURNALISTS AGREE: THE REBATE RULE WOULD PUT MORE POWER IN THE HANDS OF BIG PHARMA:

American Enterprise Institute Scholars Joseph R. Antos & James C. Capretta: “Undercutting The Ability Of PBMs To Secure Rebates Would Shift Power And Leverage To Drug Manufacturers. It Is Hard To See How Taking That Step Would Lead To Lower Overall Costs For Consumers.” (Joseph R. Antos & James C. Capretta, “Assessing The Effects Of A Rebate Rollback On Drug Prices And Spending,” Health Affairs, 3/11/19)

Jack Kemp Foundation Fellow Ike Brannon: “Ending Drug Rebates Will Not Reduce Drug Prices. The Administration’s Proposal To End Rebates Fundamentally Misdiagnoses The Problem With Medicare Part D: Rebates Are An Effect And Not The Cause Of Higher Drug Prices For Seniors. What’s More, Rebates Are Arguably The Only Mechanism Keeping Drug Prices In Check.” (Ike Brennan, “Ending Drug Rebates Will Not Reduce Drug Prices,” Forbes, 4/22/19)

Memorial Sloan Kettering’s Center for Health Policy And Outcomes Director Peter Bach: “I Don’t Think It’s At All Plausible That We Could Guess With A High Degree Of Certainty That This Degree Of Change Would Result In Savings Or Even Flat Premiums.” (Sarah Owermohle & Sarah Karlin-Smith, “Prescription Pulse: Will Dropping Rebates Raise Premiums? Azar Says, No,” POLITICO, 3/18/19)

Manatt Health Senior Advisor Ian Spatz: “I Have Never Seen A Regulatory Impact Statement On A Proposed Rule State So Clearly That The Impacts Are Impossible To Know And That The Best Analyses Suggest Some Very Negative Results Such As Higher Premiums In Medicare Part D And Overall Higher Drug Costs.” (Nicholas Florko, “Will Trump’s New Drug Rebates Proposal End PBMs? And 6 Other Burning Questions About The Idea,” STAT, 2/1/19)

New Hampshire Health Care Association President & CEO Brendan Williams: “The Real Point Of All Of This Appears To Be To Confer Further Riches Upon Drug Companies And Medicare Advantage Insurers, With Ending The Drug Rebates Adding Up To $196.1 Billion In Federal Spending By 2029, According To The Trump Administration’s Own Figures.” (Brendan Williams, “My Turn: Trump Administration Keeps Making Life Harder For Older Americans,” Concord Monitor, 3/19/19)

Axios: “One Thing That Is Pretty Certain: Pharma Wins. There’s No Mandate To Lower List Prices, And Drug Companies Would Get To See Competitors’ Rebates.” (Bob Herman, “Taking Stock Of Trump’s Drug Rebate Proposal,” Axios, 2/4/19)

AMERICANS OPPOSED THE REBATE RULE THE LAST GO AROUND

Last year, a national survey commissioned by the Campaign for Sustainable Rx Pricing (CSRxP) and conducted by Morning Consult found that Americans from across the political spectrum opposed the administration’s proposed Rebate Rule, noting serious concerns with its projected effects on Medicare Part D premiums and federal spending. In addition, the survey found Americans believe pharmacy benefit managers (PBMs) play a key role in the system.

• 28 Points: Americans informed about the Rebate Rule and its projected impacts opposed the measure by a margin of 45 to 17 percent, a 28-point spread.
• 88 Percent: A convincing 88 percent of survey respondents express concern with premium hikes for Medicare Part D beneficiaries projected under the rule, including 60 percent who expressed being “very concerned.”
• More Than 85 Percent: More than 85 percent of Americans nationwide express concern (and more than 50 percent express being “very concerned”) with Big Pharma’s support of the rule, the projected boost to Big Pharma’s bottom line, the projected cost to taxpayers and the lack of a guarantee that the rule will lower drug prices. 

• 75 Percent: Exactly three in four survey respondents said PBMs play an important role in the drug supply chain, compared to just five percent who said PBMs play a “somewhat” or “very unimportant” role.

THE MAJORITY OF AMERICANS SUPPORT MARKET-BASED SOLUTIONS TO HOLD BIG PHARMA ACCOUNTABLE

A new national survey, commissioned by CSRxP and conducted by Morning Consult in June 2020, found American voters overwhelmingly blame Big Pharma for rising prescription drug prices, believe pharmaceutical companies still put profits over people and back market-based solutions to hold drug companies accountable and lower drug prices.

• A Decisive Majority Hold Big Pharma Responsible for Rising Rx Prices: Nearly 85 percent of survey respondents lay blame for “the rising price of prescription drugs” at the feet of pharmaceutical companies.
• Americans Remain Skeptical of Big Pharma and Believe the Industry Continues to Put Profits Over People: Two-thirds of American voters believe Big Pharma puts profits before people, has left too many Americans unable to afford the medications they need to survive and must be held accountable now.

• Americans Support Market-Based Solutions to Lower Prescription Drug Prices and Hold Big Pharma Accountable: Nearly 90 percent of American voters believe it’s important Congress pass solutions to hold Big Pharma accountable.

Big Pharma is busting profit and revenue expectations and receiving billions of dollars in research funding from taxpayers while millions of Americans are struggling. Engaging in price hikes during a pandemic, while receiving billions of dollars from taxpayers to help develop COVID-19 treatments, demonstrates why policymakers must act to hold Big Pharma accountable – not reward them with a more than $100 billion bailout at the expense of American patients, seniors and taxpayers. Policymakers should instead focus on advancing bipartisan, market-based solutions to lower prescription drug prices and hold Big Pharma accountable for their price-gouging behavior and anti-competitive tactics.