Nov 16, 2020

Administration Should Abandon Misguided Policy That Rewards Drug Companies’ Price-Gouging and Anti-Competitive Tactics With Massive Bailout

On Monday, the Trump Administration took a step toward enacting a misguided policy aimed at eliminating prescription drug rebates in Medicare Part D called the Rebate Rule by sending the measure to the Office of Management and Budget (OMB) for final review. The administration made the right decision in scrapping this proposal in 2019 and should not force-through the Rebate Rule now. The Wall Street Journal rightly noted that in reviving the Rebate Rule, the administration said it would be revised to not increase premiums or federal spending — an impossible threshold that no amount of budget gimmickry could meet given the scale of the negative repercussions of this plan.

The fact is, the rule would do nothing to lower out-of-control prescription drug prices:

  • 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)
While also hiking Medicare Part D premiums on American seniors:

And even increasing out-of-pocket costs for Medicare Part D beneficiaries:

  • 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)

The Rebate Rule would also put taxpayers on the hook for at least $200 billion in increased spending:

The rule’s principal winner would be Big Pharma, who would be handed a massive bailout, effectively rewarding the industry for its egregious price-gouging and anti-competitive practices, including hiking prices on American patients during a pandemic. In addition, the Rule would eliminate a key negotiating step that serves as the only real check on the pharmaceutical industry’s unilateral control over prices:

  • 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)

Big Pharma must be held accountable for the industry’s price-gouging and anti-competitive tactics, including hiking prescription drug prices at the height of the pandemic — not handed a massive bailout paid for on the backs of seniors and taxpayers. The administration should withdraw the misguided Rebate Rule, now.

Learn more about the misguided Rebate Rule HERE.

Learn more about market-based solutions to hold Big Pharma accountable and lower prescription drug prices HERE.