The Pharmaceutical Care Management Association has filed suit against the Trump administration in an effort to block the recently finalized rebate rule.
PCMA, which represents pharmacy benefit managers, has been a staunch critic of the rule since it was first introduced in early 2019. The rule eliminates anti-kickback safe harbors for drug rebates and instead offers them to direct-to-consumer discounts, and was finalized after a surprise revival in November.
In the complaint (PDF), PCMA warns that the rule would lead to higher premiums in Medicare Part D and reflects an "erratic and highly irregular administrative process" in which the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) did not effectively coordinate.
Drug rebates have been a long-standing practice in commercial plans, which Part D was modeled on, PCMA said.
"The rule pursues this result by threatening manufacturers, PBMs, and plan sponsors with significant criminal and civil liability under the federal anti-kickback statute … simply for engaging in the same rebate practices that they have followed since the start of the Medicare Part D program, consistent with the commercial insurance market that Congress intended for Part D plans to emulate," they said.
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The organization also notes that the rule was pulled in mid-2019 under pressure from the White House due to data suggesting it would raise seniors' Part D premiums, according to the complaint.
With all of these factors at play, PCMA argues that the rule should be judged "arbitrary and capricious" under the Administrative Procedures Act and thus invalidated.
“The Trump Administration’s last-minute decision to finalize the rebate rule will drastically increase Medicare Part D premiums for seniors, while significantly increasing costs for taxpayers,” said PCMA President and CEO JC Scott in a statement. “The haphazard process to finalize a rule that had already been withdrawn circumvented the proper rulemaking process and imposes an effective date that utterly fails to take account of the CMS timeline for issuing implementing guidance, creating chaos for the upcoming plan year."
"In addition, the agency failed to consider the significant impacts on beneficiaries and government costs that were articulated in thousands of public comments opposing the rule when it was originally proposed. The rebate rule cannot be implemented and should be invalidated,” Scott said.
An HHS spokesperson said the agency does not comment on pending litigation.
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The Pharmaceutical Research and Manufacturers of America, which backs the rule, said in a statement that it's a "good policy for patients."
"The policy means that the deep discounts biopharmaceutical research companies currently negotiate with health plans will finally be passed down to seniors at the pharmacy counter," a PhRMA spokesperson said in a statement. "In fact, according to estimates, it could save many patients hundreds of dollars or more at the pharmacy counter and average savings would outweigh any modest change to premiums."
While America's Health Insurance Plans is not a party to the suit, the insurance lobbying group did release a statement backing PCMA's efforts to spike the rule. Health plans have also been harsh critics of the administration's plan to do away with rebates in Part D.
AHIP CEO Matt Eyles said in a statement that drug prices are "out of control" not because of PBM rebates but due to the actions of pharmaceutical companies.
“Drug prices are out of control because Big Pharma alone sets and controls drug prices. For years, health insurance providers and our PBM partners have negotiated discounts and rebates to reduce drug prices, saving Americans billions of dollars in health care costs," Eyles said.
“Health insurance providers are formulating their Part D bids now for 2022. This rule, left unchecked, will raise premiums for seniors who rely on Part D drug coverage," Eyles added. "We support invalidation of this rule and urge policymakers, instead, to support much-needed and deserved relief to America’s seniors.”
The Campaign for Sustainable Rx Pricing, a group that includes major payers, providers and lobbying organizations, also backed PCMA's lawsuit.
“The Big Pharma-backed rebate rule was not only issued in violation of a legally required process for public input, but the administration’s own actuaries found it would do nothing to lower drug prices while increasing premiums on Medicare Part D beneficiaries, costing taxpayers more than $200 billion and handing drug companies a more than $100 billion bailout,” said CSRxP Executive Director Lauren Aronson in a statement.