The path forward for the Biden administration: Lowering drug costs without raising premiums for seniors

The new Biden administration has started off strong, taking a thoughtful approach to any number of critical health care issues and pulling back a number of new regulations to take a fresh look at these public policy issues. To avoid significant disruption of the Medicare Part D program and avoid a spike in premiums at a time when seniors can least afford it, the administration should pull back the rebate rule, issued at the last minute by the outgoing administration.

Prescription drug rebates are a primary negotiating tool used by pharmacy benefit managers (PBMs) to exert leverage on drug manufacturers to reduce costs. As validated in reports issued by the Government Accountability Office and Health and Human Services Office of Inspector General, rebates are fully passed through from the PBM to the plan sponsor and used to keep premiums low and affordable, which has led to the historic success of the Part D program.

In the final days of the Trump administration, they moved to eliminate this vital tool by finalizing the rebate rule, a rule they had previously withdrawn and which had been projected by the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office to drastically increase Medicare Part D premiums and add nearly $200 billion to program costs. Setting aside the significant legal and regulatory violations inherent in finalizing a rule that had been widely understood as withdrawn, the overwhelming evidence that this rule will harm beneficiaries — seniors and individuals with disabilities — should be more than enough reason to stop it from going into effect.

The potential for disruption of the Part D program is significant and the need to act swiftly is indeed urgent. CMS has issued no guidance on how to implement the rule, while Medicare plans are already negotiating for the 2022 plan year and calculating bids and premiums. It is simply not feasible for the rebate rule to be implemented next year. Every day that goes by adds to the potential for disruption.

PBMs aren’t the only ones making the argument against the rebate rule. Indeed, House Speaker Nancy Pelosi (D-Calif.) noted earlier this year, “Trump’s rebate rule will increase premiums for America’s seniors and people with disabilities…[T]he latest empty announcement is an insult to all the seniors and families who are still waiting for real action to lower their prescription drug costs.”

AARP also criticized the Trump administration’s rule, saying the rebate rule “raises Part D premiums for Medicare beneficiaries AND leads to a $200B increase in Medicare spending — all while doing nothing to lower Rx prices for consumers.”

Rather than accept the rule and let beneficiaries pay higher premiums, the Pharmaceutical Care Management Association (PCMA) filed a lawsuit challenging the Trump administration’s rebate rule. PCMA’s lawsuit, filed in the district court for the District of Columbia, asks the court to set aside the rebate rule under the Administrative Procedure Act. Other groups joined in support of PCMA’s filing, including America’s Health Insurance Plans, the Blue Cross Blue Shield Association, the Coalition for Sustainable Drug Pricing, the Academy of Managed Care Pharmacy, the Coalition for Affordable Prescription Drugs, and others.

Even as our litigation proceeds, time is of the essence. The new administration has an opportunity to move quickly to promote thoughtful policies to make prescription medications more affordable. They can start by not only pausing but retracting the rebate rule. Given the urgency, we are also asking the court to grant summary judgment and vacate the rule’s effective date to buy the administration more time to craft the rule’s retraction.

We need a clean slate to consider policies that would actually reduce drug costs by creating more competition, encouraging the development of new therapeutic alternatives, empowering patients with more information on their costs, and rewarding value, as laid out in these 21 solutions to lower prescription drug costs. Fundamentally, we need policies that would lower drug costs without raising premiums for seniors. Our industry is committed to working with the new administration and Congress to advance these types of real solutions.

J.C. Scott is president and CEO Pharmaceutical Care Management Association.