Hospitals, insurers want rebate rule changed to keep pharma honest

Insurers and hospitals want the CMS to amend its proposed rule eliminating the safe harbor for Medicare Part D and Medicaid managed-care drug rebates to include new requirements for drugmakers.

In comments on the proposed rule, several companies and groups expressed concern that the change eliminating the safe harbor for rebates and replacing it with a safe harbor for point-of-sale discounts won't force drugmakers to lower prices. In addition they said implementing the changes in January 2020 would be too soon.

"Without including provisions requiring or incentivizing drug manufacturers to lower list prices, those same companies stand to see increased profit margins if rebates are removed," the American Hospital Association said in its comment. "Specifically, drug companies are likely to have less coverage gap responsibility for Part D beneficiaries and are likely to retain a portion of the money that would have otherwise been directed toward rebates."

Catholic Health Initiatives said HHS needs to fully scrap the safe harbor rule and adopt several market-based policies to combat high prices including offering incentives for using generic drugs and allowing biosimilars to be interchangeable with their more expensive, brand-name counterparts.

CHI also called for HHS to explore policies to combat anti-competitive tactics used by drugmakers to extend market exclusivity.

The top insurance lobbying group America's Health Insurance Plans said in comments that HHS should also require drugmakers disclose the "true research and develop costs and explain price setting and price increases."

The group added that the CMS should include a robust oversight of drugmakers to "ensure money that consumers could save does not instead go into drugmakers' pockets."

Insurer Blue Shield of California also wants HHS to include a new requirement to ensure that pharmaceutical manufacturers lower prices as the agency expects.

Drugmakers should confidentially disclose their per-drug rebates to HHS before changes to the safe harbor are finalized, Blue Shield said.

"The rule would then allow policymakers to compare net costs for drugs before and after any changes to the rebate safe harbor to ensure that net prices are reduced as promised or impose other regulatory requirements if necessary," the insurer commented.

Medicaid managed-care plans add that HHS hasn't fully considered the extent of the impact on the Medicaid program.

"Medicaid beneficiaries generally do not incur cost-sharing or have nominal copays for prescription drugs and therefore the conversion of rebates into point-of-sale discounts, or rebates, is unnecessary," wrote Medicaid Health Plans of America, a trade association representing 94 Medicaid plans.

Blue Shield of California commented that states should get more authority to address rising drug prices as the proposed rule will have "minimal incremental value to Medicaid members."

While the rule may not have much of an impact on copays, the Medicaid and CHIP Payment Advisory Commission said HHS should include specific language in the final rule that ensures state supplemental rebates aren't affected. The District of Columbia and 46 states get a supplemental rebate from manufacturers.

Insurers and hospitals have been fighting the rebate rule since it was released, but the pharmaceutical lobby has been pressing hard for ending the rebates.

The new rule would create a system "in which transparent, upfront discounts benefit patients, rather than a system driven by rebates that may not be used to directly benefit patients using the medicines for which the rebate is paid," drugmaker giant Pfizer said.

However, there is one area where drugmakers, hospitals and insurers agree: They want more time to transition to a new system.

Pfizer said there should be at least 36 months before it has to implement most of the changes.

Blue Shield of California said that the proposed effective date of Jan. 1, 2020, would affect "Medicare bids that would not have time to adjust to new pricing."

AHIP added that if HHS moves forward then the rule shouldn't go into effect until 2022.

"It is critical that development and testing of costly new systems and capabilities, resource-intensive changes to a multitude of contracts, and a range of other operational steps take place before disruptive changes that could affect enrollees and other stakeholders are implemented in the Part D program," AHIP said.

The CMS acknowledged this short timeframe by offering a voluntary two-year transition plan for Part D plans. But CMS Administrator Seema Verma said last week that Part D plans need to submit bids next year that are "consistent with the "Anti-Kickback statute law and regulations in effect as of the bid submission deadline."