September 30, 2020

Eliminate PBM Rebates in Part D

How it could work

The Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen proposes to reduce drug costs by applying rebates paid to Pharmacy Benefit Managers (PBMs) to the patient’s point of sale. This requires the HHS Secretary to complete the rulemaking process to remove rebates and discounts received by PBMs from drug manufacturers from safe harbor protection under the anti-kickback statute. The Secretary must also establish new safe harbors that would permit PBMs to apply discounts to the patient’s point of sale to reduce their out-of-pocket expenses. Before the Secretary proceeds with the previously mentioned rulemaking, they must publicly confirm that this change will not increase federal spending, Medicare premiums, or patients’ out-of-pocket costs.

What experts think

The expert panel agreed that this executive order will increase drug spending. The experts agreed that this policy will not affect drug list prices; they were split on if the policy will moderately increase or decrease net prices. The experts agreed that Medicare patients would see an increase in access to drugs, but no other patient group would see any change in access.

The experts generally agreed that eliminating kickbacks to middlemen advances drug spending policy, though they were split on if it would be minimal or moderate (one expert argued it does not advance drug spending policy at all). Most experts agreed that the precedent-setting value of the executive order is a strength of the policy, another strength of the policy is the size of the affected patient population. Experts also agreed that the ability to be implemented and the evidence base in support of the executive order are both weaknesses of the policy.

How likely would this policy be to reduce drug spending?
Would Increase Drug Spending
Would Not Affect Drug Spending
Would Minimally Reduce Drug Spending
Would Moderately Reduce Drug Spending
Would Significantly Reduce Drug Spending
Would Substantially Reduce Drug Spending
How likely would this policy be to reduce drug prices?
Would Significantly Increase Drug Prices
Would Moderately Increase Drug Prices
Would Not Affect Drug Prices
Would Moderately Decrease Drug Prices
Would Significantly Decrease Drug Prices
List Prices
Net Prices
How likely would this policy be to increase patient drug access?
Would Significantly Reduce Drug Access
Would Moderately Reduce Drug Access
Would Not Affect Drug Access
Would Moderately Increase Drug Access
Would Significantly Increase Drug Access
Rare Disease
Large Patient Groups
How significant is this policy in the evolution of US drug spending policy?
Does Not Advance Drug Spending Policy
Minimally Advances Drug Spending Policy
Moderately Advances Drug Spending Policy
Significantly Advances Drug Spending Policy
Ground-Breaking Shift in Drug Spending Policy
What are the strengths and weaknesses of this policy?
Size of Affected Population
Evidence Base in Support of Policy
Precedent-Setting Value
Magnitude of Drug Spending Impact
How important are the following in your analysis of the policy's impact?
Not Important
A Little Important
Somewhat Important
Very Important
Uncertainty in manufacturers response to maintain profits
Uncertainty in PBM response
The requirement that it will not increase federal spending, Medicare premiums, or cost-sharing is actuarially difficult
Similar policies have scored to increase Medicare costs and premiums
Possible changes to benefit design

Considerations for policymakers

Experts highlighted many considerations for policymakers. The most important consideration is that it is actuarially difficult for this policy not to increase federal spending, Medicare premiums, or cost-sharing, as the executive order requires. Other key considerations include the uncertainty of PBMs’ response and that past scores of similar policies have projected increases to Medicare costs and premiums. Additional considerations include the uncertainty of manufacturers’ response to maintain their profits and the possible changes to benefit design.