CSRxP: New Study Underscores Big Pharma The Only Rebate Rule Winner

Apr 8, 2019

Avalere Health Finds Proposed Rule Could Hike Premiums 40 Percent, Cost Taxpayers Over $400 Billion

Washington, D.C. – The Campaign for Sustainable Rx Pricing (CSRxP) released a statement Monday reacting to a new study, conducted by Avalere Health, analyzing three scenarios projecting the impact of the Rebate Rule proposed by the U.S. Department of Health and Human Services (HHS).

“These new findings add staggering context to what we already know: the only guaranteed winner from the proposed Rebate Rule is Big Pharma,” said CSRxP executive director Lauren Aronson.  “If this misguided regulation advances, Big Pharma stands to reap billions in new profits, while seniors and the disabled face painful premium hikes and taxpayers are forced to cover hundreds of billions in increased drug spending.”

The Avalere Health report, commissioned by America’s Health Insurance Plans (AHIP), projected the impact on stakeholders if drug makers withheld 30 or 50 percent of rebates.  The study undercut the entire premise of the Rebate Rule by projecting that out-of-pocket costs for beneficiaries under the 50 percent scenario would increase by more than $36 billion.

Avalere’s key findings if drug makers held back 50 percent of rebates include:

  • Premiums For Part D Beneficiaries (Seniors And The Disabled) Could Rise As Much As 40 Percent.
  • The Premium Hike Would Amount to An Estimated $85.7 Billion Increase.
  • The Rule Would Cost Taxpayers More Than $410 Billion, More Than The Congressional Budget Office (CBO) Projected The Creation Of The Part D Program Would Cost.
  • Net Out-Of-Pocket Spending Would Increase By $36.5 Billion.

These findings added greater context on potential outcomes to the initial report from the Center for Medicare and Medicaid Services’ (CMS) Office of the Actuary (OACT) that projected manufacturers would hold back 15 percent of rebates under the rule, resulting in:

  • Premium Hikes For Part D Beneficiaries (Seniors And The Disabled) Of 25 Percent. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)
  • A Massive Windfall For Big Pharma In The Form Of $137 Billion In Increased Drug Spending. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)

“The proposed rule places trust in Big Pharma, which has a demonstrated track record of anti-competitive behavior and price gouging, returning the full amount of rebates out of the goodness of their hearts,” Aronson continued.  “There is little question Big Pharma will be eager to hold back rebates, lining their own pockets at massive cost to seniors and taxpayers.”

“The administration is working on several commendable efforts to reduce prescription drug prices,” Aronson added.  “But the proposed Rebate Rule would be a massive step backwards that trades guaranteed negative impacts on seniors and taxpayers for theoretical and questionable price benefits.  We urge the administration to ditch the rule and focus on market-based solutions to introduce more competition into the prescription drug market to lower prices.”

AHIP is a member of CSRxP, a broad-based coalition of leaders – physicians, nurses, hospitals, consumers, health plans, PBMs, pharmacists, and businesses – promoting bipartisan, market-based solutions to lower drug prices in America.