White House withdraws controversial rule to eliminate drug rebates

The White House is withdrawing a controversial proposal to change how drugs are paid for, a spokesman said Thursday. 

The administration is scrapping a rule that would have banned “rebates,” which are essentially discounts that drug companies give to negotiators known as pharmacy benefit managers.

{mosads}This proposed rule was one of the few drug pricing moves that the pharmaceutical industry actually supported, so the withdrawal is a loss for drug companies and a big win for pharmacy benefit managers and insurance companies, who had strongly opposed losing out on the discounts they get from drug companies. 

“Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” said White House spokesman Judd Deere. “The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline.”

The proposal had split the administration, with Health and Human Services Secretary Alex Azar championing it but other White House officials pushing back and worrying about estimates that showed it could increase Medicare spending by almost $200 billion. 

Axios first reported the proposal was being withdrawn. 

Azar told reporters Thursday the proposal was withdrawn because Trump had concerns about how it would impact seniors’ health insurance premiums. 

“The president is deeply committed to protecting America’s seniors,” Azar said. 

“He does not want any risk that our actions could cause seniors’ premiums to increase.” 

The rule faced fierce pushback from the AARP, the powerful lobbying group representing seniors.

The death of the proposal is also bad news for drug companies in that it is a sign that other Trump administration efforts could move forward, some of which the companies fiercely oppose.

Most prominently, the administration has proposed tying some Medicare drug prices to lower prices in other countries, a proposal currently under review at the White House. 

Democrats, including Speaker Nancy Pelosi (D-Calif.), also opposed the rebate rule, favoring more direct actions against drug companies. White House staff has been in talks with Pelosi’s office for months on Medicare negotiating drug prices. 

Azar had argued that eliminating rebates would simplify the health care system and remove perverse incentives that could drive up prices. But that argument did not win out.