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Trump Kills His Administration’s Plan to End Secret Drug Rebates

Xconomy National — 

Donald Trump’s criticism of high drug prices began during the 2016 presidential campaign and continued through his presidency, perhaps most famously just before his inauguration when he said that drug companies were “getting away with murder.”

This week has underlined the gap between the administration’s rhetoric and results. Most strikingly, the White House said last night that Trump has killed a high-profile proposal to eliminate drug rebates from government insurance plans, an idea that drew the spotlight to two Senate committee hearings earlier this year.

The White House was also stymied by a court that ruled it could not force drug companies to include list prices in their television ads. All this came as the mid-year reports on drug-price hikes underscored how drug companies, in the wake of Trump’s tweet-shaming of Pfizer last year, are learning to raise prices with less attention.

The biggest drug-price news, however, was the abdication of the rebate rule, which was first reported by Axios.

Drug companies were cheering for the overhaul. The proposal would take rebate payments from middlemen known as pharmacy benefit managers (PBMs), who earn a slice of the insurance reimbursement pie in secret negotiations with drug makers, and give the payments to consumers.

The topic has been top of mind in Congress, as well. In 2017, after Trump again charged drug companies with rhetorical murder, rebates were a big part of a Senate committee hearing on high drug prices.

At two hearings earlier this year, a different Senate committee drilled down on rebates with two rival groups. In the first hearing, pharma executives said that without rebates their companies could bring down prices without outside regulation.

The committee’s top Democrat Ron Wyden (D-OR) warned the executives against “pointing fingers at the middlemen.” Wyden claimed that 40 percent of drugs “don’t even have a rebate.”

Two months later, PBM executives fielded the committee’s questions and criticism. Sen. Debbie Stabenow (D-MI) noted that PBMs represent hundreds of millions of Americans compared to 9 million represented by the Veterans Administration, but the VA pays 40 percent less for the same drugs. “Despite greater volume, you are unable to secure these kinds of low prices,” she said. “With all due respect, you guys are pretty bad negotiators.”

A report this spring from drug-price watchdog Institute for Clinical Economic Review (ICER) outlined three alternatives to the current rebate system, all with complicated pros and cons.

In a statement, the White House said President Trump decided to kill the rule and pointed to Congressional efforts to lower drug prices through legislation. The rebate rule was championed by Health and Human Services secretary Alex Azar, previously a top executive at drug maker Eli Lilly (NYSE: LLY) but opposed by others in the White House, including domestic policy chief Joe Grogan, according to Politico.

Photo courtesy of Michael Vadon via Creative Commons.