The APCR is proud to sign-on to the following letter supporting recent proposals to change the structure of the drug rebate system within Medicare that could dramatically increase the quality of life for American living with chronic diseases like diabetes.
Dear Secretary Alex Azar,
The current prescription drug payment system within Medicare Part D is fundamentally flawed, with middlemen reaping the benefits while patients are left holding the bill. Artificial distortions in the marketplace continue to make it harder for the more than 43 million Part D beneficiaries to afford prescription medications through the program. This issue is particularly salient for patients with chronic illnesses, like diabetes, who require regular prescription medications to manage their conditions. A key driver of these issues is the complex and often secretive process by which rebates for prescription medications are distributed.
Prescription drug rebates are negotiated by biopharmaceutical manufacturers, insurance plans and pharmacy benefit managers (PBMs) aimed at lowering the net costs of medicines. Unfortunately, the rebate system in its current form typically does not result in these discounts directly benefiting patients. Instead, in most cases plans and PBMs keep these discounts and use them to lower the plans’ overall costs, instead of lowering cost sharing for patients who use the rebated medicines. This practice has created an unsustainable status quo in which patients’ out-of-pocket costs remain unaddressed while plan and PBM profits soar.
The Department of Health and Humans Services recently proposed a rule that would eliminate existing protection for rebates and instead would permit manufacturers, PBMs, and plans to negotiate for discounts that would then be used to lower patient cost sharing. The new rules would also prevent PBMs from being paid based on the list price of a medicine, aimed at eliminating one incentive PBMs may have to favor products with higher list prices. These changes stand to not only bring renewed accountability and transparency into the prescription drug market but improve patient health outcomes as well.
By putting a priority on lowering the costs patients pay at the pharmacy counter, this proposal looks to address affordability problems in our health care system. The Department of Health and Human Services’ analysis finds the average difference between the list price of a drug and the net price after a rebate is 26 to 30 percent. Independent analysis finds that diabetes patients on Medicare could save as more than $350 annually on their prescription medications if this proposal were enacted.
The proposed changes would bring other improvements to the Part D benefit for all seniors and people with disabilities. For example, HHS’s analysis predicts that plan deductibles would decrease an average of 20 percent by 2029 and the amount of spending required to reach the coverage gap would also decrease 20 percent. These changes would extend the benefits of this proposal to beneficiaries taking generic medicines.
Lower costs ultimately translate into more patients being able to afford the medicines they need without the risk of falling into financial ruin. With more chronically ill patients able to manage their conditions, use of other health care services could fall, bringing savings to other parts of Medicare.
Reforming the current rebate structure under the Medicare Part D program is a common-sense reform that can quickly give relief to millions of patients at the pharmacy counter without disrupting current treatment regimens. There is no justifiable reason for the system to remain in its current form, putting the profits of unaccountable middlemen in the prescription drug distribution system ahead of the health and wellbeing of seniors calling out for real solutions from elected leaders. By cracking down on the perverse incentives in our marketplace, we can begin to create a fairer system that finally puts patients’ needs first.