The US government pulled the plug on plans designed to reduce drug prices by limiting rebates paid by drugmakers to pharmacy benefit managers (PBMs). White House spokesman Judd Deere said on Thursday that “based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule.”
Under the proposal, which was announced in January, legal protections for the rebates paid by companies to third parties that participate in Medicare’s Part D drug-benefit programme would have been reduced and instead drugmakers would have been encouraged to pass the discounts directly to patients. Although President Trump’s administration touted the potential cost savings of the programme, the Congressional Budget Office estimated that the proposal would increase spending by $177 billion through 2029 and was unlikely to lead to drugmakers lowering prices.
Commenting on the news, CVS Health spokesman TJ Crawford remarked “we’re pleased the administration recognised the impact the rebate rule would have on seniors,” continuing “and look forward to continuing to work with all stakeholders on lowering drug costs. Any solution should start with addressing drug prices.” Shares in PBM Cigna climbed up to 13.5% on the news, while shares in CVS Health rose by 7%.
JP Morgan analyst Gary Taylor explained that “political momentum was building against the 2020 implementation of the CMS proposal to eliminate pharmaceutical rebates in government programmes due to the perceived unintended windfall profits that might have accrued to pharmaceutical manufacturers.” Height Securities analyst Hunter Hammond added that the decision represents “a substantial setback for drug manufacturers that could have seen a windfall” from the rebate overhaul.
Deere added “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.”
However, the Trump administration faced a setback earlier this week, after a US judge invalidated a rule that would have forced drugmakers to include the list prices in direct-to-consumer television advertisements for certain prescription medicines covered by Medicare or Medicaid. Trump also recently disclosed that his administration is preparing an executive order that would require the US to pay no more for drugs than the country with the lowest prescription prices.