Congress to add delay to Part D rebate rule to help pay for infrastructure package

Capitol building in Washington
PhRMA is concerned about emerging reports that a delay to a controversial rebate rule could help pay for a bipartisan infrastructure package. (Photo by rarrarorro/iStock/Getty Images Plus/Getty Images)

The Senate aims to delay a controversial rebate rule to help pay for a roughly $1 trillion package but faces fierce pharma opposition. 

Sen. Joe Manchin, D-West Virginia, confirmed on late Thursday to Politico that the package will include a delay to help pay for the package, but did not say for how long. 

The rule would eliminate a safe harbor for Medicare Part D rebates and replace it with a new protection for discounts offered at the point-of-sale. The regulation, which has stiff opposition from the pharmacy benefit management and insurer industries, was delayed by the Biden administration until Jan. 1, 2023. 

The Pharmaceutical Research and Manufacturers Association, a top drug lobbying group, took a preemptive shot earlier this week to avert any delay in the rebate rule.

“Despite railing against high drug costs on the campaign trail, lawmakers are threatening to gut a rule that would provide patients meaningful relief at the pharmacy,” said Debra DeShong, executive vice president of public affairs for PhRMA, in a statement.

DeShong added that including a delay in the infrastructure package will “provide health insurers and drug middlemen a windfall and turn Medicare into a piggy bank to fund projects that have nothing to do with lowering out-of-pocket costs.”

The rebate rule was released under the Trump administration and sought to address Part D drug rebates that drugmakers offer to pharmacy benefit managers in exchange for participation on their formularies. Rebates had a safe harbor that provides protection from federal anti-kickback laws. The rule would get rid of this safe harbor and replace it with a new protection for discounts offered at the pharmacy counter.

Former Department of Health and Human Services Secretary Alex Azar touted the rule as a method to get rid of rebates, which he has called a kickback that drug makers are forced to give to PBMs and insurers.

But the rule was withdrawn in 2019 after concerns from the White House that it would raise Part D premiums for seniors. It was later resurrected in late 2020.

PBMs and insurers have fervently fought the regulation, pointing to a report from the Centers for Medicare & Medicaid Services actuaries that the rule would raise premiums by 19%.

While the Biden administration delayed implementation of the rule for another year, PBMs and insurers have asked Congress to fully nix it.

A report from the nonpartisan Congressional Budget Office projected that the rule would increase federal spending by $177 billion through 2029. The increase in spending would come from an increase in premiums and drugmakers implementing a chargeback system where they withhold some of the discounts they previously negotiated with payers, the report said.

The bipartisan infrastructure package includes roughly $1 trillion in spending on projects such as roads and IT infrastructure.

It is being considered separately from a $3.5 trillion package that includes several healthcare priorities such as expanding Medicare benefits to add dental, hearing and vision. Democratic senators also hope to give Medicare the power to negotiate for lower drug prices.