Trump unexpectedly resurrects rebate reform in executive order

Updated on July 29, 2020, at 1:25 pm.

Surprise! President Trump signed four executive orders aimed at lowering drug prices on Friday, July 24—and one of them includes a rebate reform rule long thought to be dead in the water. It’s a step forward, and APhA and other pharmacy advocates are now working on securing a meeting with the U.S. Department of Health and Human Services (HHS) Secretary to ensure it also addresses PBMs' harmful use of pharmacy direct and indirect remuneration fees (DIR) fees. DIR fees have a negative effect on pharmacy sustainability and patient access to care.

“PBMs lost this round. Now, our job is to work with HHS and our pharmacy partners to ensure the agencies implementing the rebate rule also end PBMs’ gaming of a Medicare regulation loophole, inflating patients' prescription-drug costs and forcing more pharmacies to close due to the egregious DIR fees they impose and collect for their own profit,” said APhA CEO Scott Knoer, MS, PharmD, FASHP.

The unexpected executive order, however, does not specifically mention or end DIR fees altogether. The Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen would eliminate “safe harbor” protections from anti-kickback laws and criminal penalties unless PBMs include pharmacy price concessions—such as the rebates and other discounts the middlemen get through negotiations with drug manufacturers—are applied at point of sale. Because Medicare Part D patients’ amount of cost-sharing is determined based on formulary list prices—not what PBMs actually pay for the drug—they don’t currently benefit from rebate savings. The rebate reform rule required under the executive order would ensure any savings are enjoyed by the patient at the pharmacy counter.

“We are encouraged by the administration’s attempt to lower patients’ out-of-pocket costs at the pharmacy counter and urge the administration  to align these policies with APhA’s long-standing advocacy and House of Delegates policy to eliminate Part D plans’ and PBMs’ harmful use of retroactive DIR fees,” Knoer continued. “Lowering drug costs for patients at the counter cannot come at the cost of PBMs squeezing more out of pharmacies. PBMs’ detrimental antics have to stop”.

Retroactive DIR fees, which are “clawed back” from pharmacies, do not lower prices for patients—again, because their cost-sharing responsibility is based on formulary list prices. Pharmacies may not realize they have lost money on a prescription until weeks or months after a prescription is filled. This makes it nearly impossible for pharmacies, particularly in the independent space, to judge whether they can make payroll, are in a position to expand, or are even able to keep their doors open.

“Eliminating the retroactive use of DIR fees would show progress, but we must go further to end PBMs’ devastating misuse of DIR fees on pharmacies and patients once and for all,” Knoer concluded.

It’s hard to say what the executive order will look like in practice, as it must undergo rulemaking by HHS before implementation. It calls for the HHS Secretary to complete the rulemaking process already started with an earlier version of the rebate reform rule. Read APhA’s previous comments on how to improve the earlier version. APhA and our pharmacy partners will be meeting with HHS staff to discuss the path forward and there may be an opportunity to advocate for the eradication of DIR fees during this process.

Additionally, the Secretary of HHS must first publicly confirm that “the action is not projected to increase federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” The contention that eliminating DIR fees would increase Medicare Part D premiums is a frequent PBM talking point.

“A potential work-around would be if the HHS Secretary interpreted compliance with this provision of the executive order if projected out-of-pocket cost savings [on the price of prescription drugs] are higher than any increases in beneficiary premiums,” said Ilisa Bernstein, PharmD, JD, APhA senior vice president of pharmacy practice and government affairs.

Trump signed three other executive orders on Friday. One directed implementation of a program for personal importation of medications from outside the United States, which APhA and other pharmacy groups have opposed on the grounds that it puts patient safety at serious risk. The U.S. has more rigorous supply chain standards, which imported drugs will not have cleared, and illegitimate online pharmacies that peddle counterfeit and otherwise unsafe medications continue to proliferate. The Canadian government has also opposed this measure, as it puts that country at risk of drug shortages.

Another executive order would allow patients without affordable access to insulin or injectable epinephrine to purchase the products through entities enrolled in the 340B Prescription Drug Program.

The last order aims to establish an “international pricing index,” which would tie U.S. drug prices to what other countries pay. That policy also has opposition on the basis that it constitutes price fixing. It’s also unclear if it would also force pharmacists to dispense medications at lower costs paid in other countries. The text of the order had not been posted at press time.

These three executive orders also must proceed through HHS rulemaking before they can take effect.

UPDATE: Read a joint letter APhA and other pharmacy groups sent to Secretary Azar to include DIR reform in rulemaking on the executive order and any efforts to lower drug prices. "Without pharmacy DIR fee reform, the impact of implementing a system to pass rebates onto patients at the pharmacy counter may prove disastrous for pharmacies," the letter reads.