White House targets PBMs for drug-price savings

FDA Commissioner Dr. Scott Gottlieb said tweaking drug rebate laws that favor pharmacy benefit managers could be key to reducing drug prices.

Drug companies now pay rebates to pharmacy benefit managers to either make their products the only ones available for coverage to consumers or to make the co-pay for their offering less than competing products. But these savings aren't always passed on to consumers.

"PBMs have long been diverting these savings to their own bottom line," a spokeswoman for the Alliance for Transparent & Affordable Prescriptions said. "It's time for the government to look anew at whether that amounts to an inappropriate inducement."

For example, a month's prescription of the generic for heartburn reliever Nexium could cost as little as $25, while the brand-name version runs about $700. Yet some pharmacy benefit managers continue to favor the name brand.

Gottlieb on Thursday said the Trump administration is considering revisiting the law.

"What if we took on this system directly, by having the federal government re-examine the current safe harbor for drug rebates?" Gottlieb asked at a Food and Drug Law Institute conference.

If the protections were eliminated or altered, PBMs say prices could actually increase.

"Getting rid of rebates would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturer pricing strategies," the Pharmaceutical Care Management Association said in a statement. "Simply put, the easiest way to lower costs would be for drug companies to lower their prices."

Legal experts disagree and some support the White House revising the safe harbor around drug rebates.

"Discouraging large pay-for-placement rebating will go far in bringing greater transparency, and lower list prices, to consumers," said Thomas Sobol, an attorney at Hagens Berman Sobol Shapiro.