The executive order on rebates is a good first step, but don’t pop the cork yet

Everyone knew that President Trump was going to sign executive orders on drug prices the last week of July. No one expected that among them would be a rule that could force PBMs to pass on to Medicare Part D beneficiaries any discounts from manufacturer rebates and other price concessions. Nothing is really shocking these days, but the resurrection of the rebate reform rule—which had failed to advance down a number of avenues before this—did elicit, in a good way, a “Huh,” from me, the APhA government affairs (GA) team, and a lot of other interested parties.

It was a rare L for PBMs, and it’s a positive sign to see executive branch recognition that PBMs do not make drugs more affordable to patients—yet it’s not quite a W for us. Now, our job is to work with the U.S. Department of Health and Human Services (HHS) and our pharmacy partners to ensure the agencies implementing the rebate rule also end PBMs’ gaming of Medicare regulation loopholes, inflating patients' prescription-drug costs, and forcing more pharmacies to close due to the egregious direct and indirect remuneration (DIR) fees they impose and collect for their own profit.

Here’s what the Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen actually means:

  • Currently, PBMs and health plans have “safe harbor” from federal anti-kickback statutes and associated criminal penalties. That is, they are allowed to operate with business practices that are verboten in other industries.
  • These business practices include the use of rebates that PBMs get by negotiating with drug manufacturers, as well as DIR fees that are retroactively extracted from pharmacies weeks or months after the patient has picked up their prescriptions—the bane of pharmacies in most practice settings.
  • Under the executive order, these PBM practices would still be immune from anti-kickback statutes, but only if the savings from rebates or other price concessions from manufacturers would be applied at point of sale.
  • In other words, patients’ cost-sharing amount would be based on what PBMs actually paid for the drug, not formulary list prices. The rebate reform rule required under the executive order would ensure any savings are enjoyed by the patient at the pharmacy counter.

But there are some caveats:

  • One, executive orders are slow to take effect. Before implementation, they must undergo HHS rulemaking to work out the specifics.
  • Two, the executive order will only move forward if HHS Secretary Alex Azar determines the measure is not projected to increase federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.
  • And three, even if the executive order does go into practice, it won’t end the vampiric DIR fees that put many pharmacies on life support—they would only be applied at point of sale. That would be progress, but we must go further to once and for all end PBMs’ abuse of DIR fees that harm pharmacies and patients.

APhA has already planned out some next steps. First, the GA team is reaching out to set up a meeting with Secretary Azar to ensure he understands DIR fees’ devastating effect on pharmacy sustainability and patient access to care, as well as how those things are inextricably linked. Executive order or no, we need a top-to-bottom overhaul of the pharmacy payment system to get this thing untwisted. Here’s a letter APhA and other pharmacy groups sent to Secretary Azar on July 28 to make sure he knows how perverse the situation really is.

Any advancement is welcome, and I’m grateful that President Trump acknowledged some of the chicanery that PBMs are imposing on the health care system. PBMs lost this round, and we are going to do everything in our power to ensure they lose a lot more.

P.S. If you haven’t already, watch this 5-minute clip of APhA President Michael Hogue, PharmD, FAPhA, FNAP, telling Fox Business News viewers why Congress empowering pharmacists to administer COVID-19 tests is crucial to keeping the nation healthy, getting Americans back to work, and making it safe for our kids to return to school. Great job, Dr. Hogue! You did us proud.