The Trump administration's executive order placing restrictions on rulemaking requiring middlemen to pass drug rebates directly to patients may not be legally binding.
HHS on Friday submitted a final rule to the White House budget office that would prohibit pharmacy benefit managers from retaining rebates paid by drugmakers. The president in July signed an executive order stating that the HHS secretary must publicly certify that any such policy will not increase insurance premiums, federal spending or Medicare beneficiaries' out-of-pocket costs. However, regulatory experts say the agency could likely work around the order.
Drugmakers like the policy as it insulates patients from the sticker prices of some expensive drugs, while pharmacy benefit managers and insurers oppose it.
If the administration releases a final rule, it could go into effect in 60 days. That means the rule would need to be released this week to be effective before Inauguration Day, when any policies not finalized could be stalled by the new Biden administration.
Even the most favorable cost analyses of the proposed rebate rule estimated that it would increase Medicare beneficiaries' premiums in all scenarios. The finding reflects the rule's design to take money insurers currently use to keep premiums low across all beneficiaries and use it to lower out-of-pocket costs for a smaller subset of individuals taking drugs that have high rebates.
"Eliminating rebates without raising premiums presents the ultimate public policy paradox," said Thorn Run Partners Senior Vice President Shea McCarthy.
The administration could potentially commission a new analysis if it wanted to comply with the order or make changes to the policy. But the secretary isn't legally bound to any particular analysis when certifying the rule's financial impacts. HHS Secretary Alex Azar has argued that plans would keep premiums low because they compete on the basis of premiums in the Medicare Part D program.
"I think there is a scenario where the secretary could make an assumption that premiums will not increase," said Kelly Cleary, a partner at Akin Gump Strauss Hauer & Feld and a former deputy general counsel at HHS under the Trump administration.
The executive order isn't binding for the administration and carries no legal significance, Cleary said.
The rule is currently listed on the White House budget office's website as "economically significant," which means that it is either likely to have an annual effect on the economy of at least $100 million or adversely affect in a material way the economy or a sector of the economy. It doesn't necessarily indicate federal costs.
"This economic impact does not have to pertain to government costs, Medicare premiums, or out of pocket costs," said Dan Bosch, the director of regulatory policy at the American Action Forum.
HHS declined to comment on the rulemaking process. The agency previously said it had withdrawn the rule after policy conflict within the administration, but it was apparently not technically withdrawn from all formal rulemaking channels.
The policy has powerful opponents in the Trump administration, but also an important proponent: White House Chief of Staff Mark Meadows. Meadows as a congressman circulated a letter to colleagues urging Azar to finalize the proposed rule.