PhRMA Statement on Comments to CMS Regarding Proposed Part D Rule and RFI Exploring Pass-Through Rebates to Seniors at Point of Sale

WASHINGTON, D.C. (January 16, 2018) — Today, the Pharmaceutical Research and Manufacturers of America (PhRMA) submitted comments to the Centers for Medicare & Medicaid Services regarding the proposed rule, “Contract Year 2019 Policy and Technical Changes to the Medicare Advantage Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program.” The proposed rule included a Request for Information (RFI) soliciting feedback on pass-through rebates in Part D. Excerpts from the comments can be found below; full submitted comments from PhRMA can be found here. The following is a statement, focused on the RFI, from PhRMA President and CEO Stephen J. Ubl:

“For more than 10 years, Medicare Part D has succeeded in providing affordable prescription drug coverage for more than 42 million seniors, at a far lower cost than initially anticipated. This success is largely due to strong market competition among private health plans that work to keep costs low and negotiate with pharmaceutical manufacturers for savings and rebates. In fact, from 2010 to 2015, these rebates increased nearly 24 percent per year, about twice as fast as total Part D drug costs, with manufacturer rebates accounting for the bulk of that growth. Too often, however, plans do not pass those savings and rebates on to seniors at the point-of-sale, leaving millions of beneficiaries facing higher out-of-pocket costs, even when savings from lower premiums are factored in to seniors’ total costs.

“PhRMA applauds the Administration for exploring options for patients to benefit more directly from discounts and rebates. Allowing seniors to benefit from those discounts at the pharmacy counter will make this successful program work even better while premiums remain affordable, patients’ access to needed treatments is preserved and competition continues to drive down cost.

“Sharing the savings in Part D could benefit millions of seniors, strengthen the program’s competitive incentives and generate significant government savings.”

Excerpts from comments:

“Strong competition among private plans has fueled the Part D program’s success. Multiple, competing plans work to keep costs low by negotiating rebates with biopharmaceutical companies to reduce the cost of Part D covered drugs—by as much as 30 percent to 70 percent for branded products.[1]While these savings are significant, PhRMA is increasingly concerned that the discounts offered on branded products are not extended to Part D beneficiaries, who are increasingly subject to coinsurance tied to an undiscounted price with no maximum out-of-pocket protection. For some beneficiaries, Part D coverage is no longer affordable notwithstanding the low and stable premiums. In the absence of change, the value of Part D coverage could continue to erode over time; as health plans negotiate more and larger rebates that are not shared with patients at the point-of-sale, those patients effectively bear a higher and higher percentage of the cost of their medicines. In other words, their coverage is worth less.”

“PhRMA strongly supports CMS’s inclusion of a Request for Information (RFI) on approaches to re-balance the program by passing through some level of negotiated rebates to patients. We believe this single policy change could yield lower out-of-pocket costs immediately (upon taking effect) for millions of beneficiaries while also generating multi-billion dollar savings to the federal government over a ten year window.”

“…accounting for behavioral changes, passing through 50 percent of rebates and 100 percent of pharmacy price concessions at the point-of-sale could save beneficiaries an estimated $8B to $28B and could save the federal government an estimated $8B to $73B over a 10-year period.”[2]

CMS proposes requiring plans to pass through a portion of the cost-weighted average rebate amount calculated at the therapeutic class or category-level.[3]PhRMA believes the proposed rebate pass through methodology described in the RFI will not achieve the objective of realigning market incentives, and strongly urges CMS to consider an alternative approach to implement pass through of rebates at the point-of-sale. PhRMA supports approaches to pass through rebates for specific products (structured to preserve confidentiality, and opposes use of a method that would rely on class or category-level averages.”

About PhRMA
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier, and more productive lives. Since 2000, PhRMA member companies have invested more than $600 billion in the search for new treatments and cures, including an estimated $65.5 billion in 2016 alone.

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[1] QuintilesIMS Institute. Estimate of Medicare Part D Costs After Accounting for Manufacturer Rebates, October 2016; Gronholt-Pederson J, Skydsgaard N, Neely J, Novo Nordisk Defends U.S. Diabetes Drug Pricing. Reuters November 4, 2016; Silverman E, What the “Shocking” Gilead Discounts on its Hepatitis C Drugs Will Mean, Wall Street Journal, February 4, 2015; Barrett P, Langreth R, The Crazy Math Behind Drug Prices: Intermediaries that Negotiate to Lower Prices May Cause Them To Increase Too, Bloomberg Businessweek, June 29, 2017.

[2] Id.

[3] 82 Fed. Reg. at 56421.