‘Rebate rule’ is wrong path to reducing prescription drug costs

Pharmacy benefit managers are part of the solution, not the problem

The ‘rebate rule’ would eliminate the primary tool used by pharmacy benefit managers to negotiate increased access to affordable prescription drugs with drug manufacturers, Scott writes.  (George Frey/AFP via Getty Images file photo)
The ‘rebate rule’ would eliminate the primary tool used by pharmacy benefit managers to negotiate increased access to affordable prescription drugs with drug manufacturers, Scott writes. (George Frey/AFP via Getty Images file photo)
Posted February 18, 2021 at 6:00am

As the Biden administration and the new Congress examine policies to reduce prescription drug costs, one place to start is officially revoking the so-called rebate rule, which was hastily — and likely illegally — finalized in the remaining days of the Trump administration. 

The rebate rule clumsily attempts to eliminate the primary tool used by pharmacy benefit managers, or PBMs, to negotiate increased access to affordable prescription drugs with drug manufacturers. The rule would not reduce drug costs: Centers for Medicare and Medicaid Services actuaries and the Congressional Budget Office have said it would significantly increase Medicare Part D premiums and add nearly $200 billion in Part D program costs for taxpayers.

Understanding that the rule would raise and not lower prescription drug costs, the Biden administration moved to delay the rebate rule’s effective date. We applaud President Biden and his team for exercising caution and delaying the rule so they can review it.

Unfortunately, defenders of the rebate rule like former Reps. Joe Crowley and Bill Shuster have made inaccurate remarks in support of the policy and outright fabrications about PBMs, the one group in the prescription drug supply and payment chain working to reduce drug costs. PBMs work on behalf of hundreds of millions of patients to make treatments more accessible and affordable, and support policies to lower costs and improve patient care. 

Contrary to some assertions, it’s important to remember that PBMs fully pass on rebates in the Medicare program. The Government Accountability Office, in a 2019 report, reported that PBMs passed 99.6 percent — all but less than one-half of 1 percent — of rebates to Part D plan sponsors. Another report, issued by the Health and Human Services Department’s inspector general, found that rebates are used to keep Part D premiums low and affordable.

The former lawmakers are right that lowering drug prices should be a bipartisan issue, but restricting PBMs’ ability to negotiate cost reductions does nothing to accomplish that objective. 

Opposition to the rebate rule extends far beyond PBMs. Several major health care organizations for seniors have voiced their opposition, with AARP noting that the 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.”

When the rule was announced, Speaker Nancy Pelosi said it would “increase premiums for America’s seniors and people with disabilities” and called it “an insult to all the seniors and families who are still waiting for real action to lower their prescription drug costs.” 

PBMs, acting on behalf of hundreds of millions of patients to make treatments more accessible and affordable, are an integral piece of the solution to high drug costs, not the problem. The rebate rule, however, is the problem — either Congress should repeal it or the administration should revoke it.

JC Scott is the president and CEO of the Pharmaceutical Care Management Association, which represents America’s pharmacy benefit managers.