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Has the Life Expectancy of Drug Rebates Been Reduced?

By: Kelly Dempsey, Esq.

That’s a pretty big question as we learn more about the Trump Administration’s attempt to reduce drug costs.

We all know drug prices are off the charts and several attempts to control pricing have failed to get up and running. As you may recall, President Trump indicated during his campaigning that he would develop a plan to lower prescription medicine costs. The U.S. health secretary (Azar) is making some moves and has indicated that eliminating drug rebates may help reduce costs.

Cost containment is key to self-funding and high drug costs have caused employers and plans to explore options to keep plan costs down, including utilizing vendor programs that obtain drugs from outside the U.S. and/or build certain rebate programs into the customized plan design. While there’s still a lot that must be worked through before changes are implemented, these four key takeaways may give plans, employers, brokers, PBMs, and other vendors some heart burn:

  1. In July 2017 the Department of Health and Human Services proposed regulations that reduce the protections for rebate programs – without these protections, these programs could be found to be illegal under federal ant-kickback laws.
  2. The PBM industry has contested the proposed rules indicating that Congress would need to modify a federal statute (instead of HHS just issuing rules).
  3. The FDA released a plan to increase the use of biosimilars (lower cost versions of biotech medicines).
  4. Health Secretary Azar directed the FDA to explore importation of drugs from other counties to combat high prices in the U.S.

Plans and vendors that utilize these types of programs should be on the look-out for rule changes to ensure continued health plan compliance.