Rebate Rule Not in Effect until 2023
The rebate debate has been a heated discussion in the news due to, among other things, the inflation in drug prices. While some stakeholders point to pharmacy benefit managers (PBMs) as the main “culprit” for increased costs, some have also argued that drug rebates have lowered drug spending and members’ monthly premiums.
Since 2014, the Centers for Medicare and Medicaid Services (CMS) has voiced concerns regarding passing rebates directly to consumers at the point-of-sale (POS). This concern further expanded to manufacturer and pharmacy rebates in the interest of price transparency(1).
In 2020, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) published the Final Rule that removes certain pharmaceutical rebates pertaining to Medicare Part D plans and creates two new safe harbors:
Protecting point-of-sale rebates offered by manufacturers for prescription drugs covered under Part D or Medicaid managed care organizations, and
Restricting certain pharmacy benefit manager (PBM) service fees paid by the manufacturers.
The Final Rule has been met with challenges and support from different healthcare stakeholders. One key stakeholder, the Pharmaceutical Care Management Association (PCMA) filed a lawsuit against the Trump Administration (now Biden Administration) to stop implementation of the Final Rule. PCMA argued that the Final Rule exceeds HHS and the OIG’s statutory authority, and that it will “significantly increase beneficiary premiums and government costs.” In response to PCMA’s litigation, among other considerations, the Biden Administration announced on January 30, 2021, that it has postponed the effective date of the Final Rule from January 1, 2022, to January 1, 2023.
The postponed effective date of the Final Rule has been a welcome news for PBMs and health plans that have signaled their intent to keep drug rebates in their price negotiations. Until a final decision is made, the question of drug rebates and their impact on drug prices will continue to be contentious and unresolved.