The Trump administration is considering a proposal to overhaul safe harbor protections for pharmaceutical company rebates, a plan that could lead to a significant shift in how drug prices are determined.
The Office of Management and Budget is reviewing a proposed rule from the Department of Health and Human Services on the matter. Details on how exactly HHS wants to rethink safe harbors are scant, as the rule will not be released publicly until OMB signs off on it.
But the rule's title—"Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection"—signals that the changes could be significant.
Pharmacy benefit managers, or PBMs, have been a prime target in the ongoing debate on how to best lower drug prices, and critics have scorned the way they use rebates. PBMs have traditionally been protected from antikickback lawsuits under established safe harbors.
HHS Secretary Alex Azar has both defended and criticized PBMs and the rebate payment system. At a Senate hearing on the plan, Azar said that PBMs would be a key partner in reducing drug prices, and that reforms would allow them to do their jobs better. However, Azar also said that PBMs pose a major barrier to drug companies looking to lower prices.
Though the rule has yet to be released publicly, the Pharmaceutical Care Management Association (PCMA), a PBM trade organization, released a statement on Thursday warning against changes to current safe harbor protections and hinted at the potential for a legal challenge should the rule be approved.
PCMA said that recent research debunks the assertion that drug rebates contribute to rising costs and said that rebates have actually led to significant Medicare savings. HHS may also not have the authority to overhaul the safe harbors through rulemaking, the group said.
"While we await the administration's expected proposal to re-examine the anti-kickback and Medicare Part D statutes as they relate to rebates and safe harbors, we are immediately faced with several troubling questions," PCMA CEO Mark Merritt said in the statement. "Before proceeding further with any proposed changes to the long-standing safe harbor protection for manufacturer rebates to pharmacy benefit managers, we would encourage the administration to review the extensive public comments PCMA and other payer-oriented groups submitted just a few days ago in response to HHS' blueprint request for information on this very issue."
A spokeswoman for HHS told Bloomberg that the agency could not comment on pending regulations but said that the administration's blueprint clearly notes that it intended to rethink safe harbor protections for the rebates.
Pharmaceutical companies have blamed the rebate system and its opacity as a major factor in the rising cost of drugs. In its response to HHS' request for information on the drug price blueprint, the Pharmaceutical Research and Manufacturers of America pushed for the agency to rethink how payments in the drug supply chain are structured.
"Reforms to prevent PBMs and others in the supply chain from being paid off the list price of a medication can fix broken incentives and make the system work better for patients," PhRMA said.
America's Health Insurance Plans' board of directors issued a statement (PDF) on Thursday that didn't address the potential safe harbors overhaul directly but defended PBMs and payers against the charge that they take advantage of drug rebates to boost their bottom lines.
"Health plans (and our pharmacy benefit manager partners) negotiate with manufacturers to reduce drug prices and costs for patients, employers, and other payers," the board said. "We enter these negotiations to make drugs more affordable while ensuring access to a full range of medicines and therapies needed to treat our members."
AHIP is committed to working alongside pharmaceutical companies to lower drug costs, the board said.