by Sally C. Pipes
Earlier this year, the Trump administration proposed a rule that would have ensured that tens of billions of dollars of hidden rebates and discounts went to patients. Sadly, the White House just chose to abandon this sensible, bipartisan reform.
It’s a shame President Trump did not see this effort through. Millions of patients would have benefited from the change in the form of lower pharmacy bills and better health outcomes.
The rule impacted Medicare Part D, the federal prescription drug benefit for roughly 45 million seniors. Under Part D, private insurers compete to sell prescription drug plans to Medicare beneficiaries. The government subsidizes and regulates these plans, but largely lets the private sector take the lead.
As a result of this competition, beneficiaries can choose from dozens of plans, each with different premiums, copays, and formularies — the lists of medicines covered by plans.
Insurers often hire pharmacy benefit managers (PBMs) to design their drug benefits. PBMs decide which drugs to include on formularies and how much patients will have to pay out-of-pocket.
Drug makers offer massive discounts to PBMs — $166 billion in 2018.
PBMs keep a small slice of these rebates for themselves and hand most of the rebates back to insurers, who use them to lower premiums.
Those savings do little good for the sickest patients who need many prescriptions. When these patients get to the pharmacy, they generally fork over copays or coinsurance — a set percentage of a drug’s cost.
President Trump wanted to reform this system to bring relief to America’s sickest patients: those in need of multiple drugs. His now-dead rule would have made it illegal for drug companies to offer rebates to PBMs and insurers, unless those middlemen pass the savings directly to patients through lower copays and coinsurance.
Seniors could have seen significant savings under the policy. Sharing 100 percent of rebates would save diabetes patients $3.7 billion each year. That’s around $800 per patient.
Another estimate found if the proposal were enacted, patients battling cancer, autoimmune diseases, and other debilitating conditions could have saved $20 billion over the next decade.
President Trump’s plan would have saved lives. Cost concerns are one of the most common reasons for patients to skip their pills. Medication non-adherence kills around 125,000 Americans a year. Patients live longer when copays and coinsurance are lower — it’s as simple as that.
The president’s decision to scrap the proposal is bad news for patients. Let’s hope the Trump administration suggests a viable alternative soon.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter 2018). Follow her on Twitter @sallypipes.
