Hello, Lower Out-of-Pocket Rx Prices

February 7, 2019

Has the era of lower out-of-pocket drug prices finally arrived?

The Trump administration’s newest plan to reduce prescription drug costs targets a mainstay of the price negotiation process – rebates driven by health insurance middleman known as pharmacy benefit managers.  These rebates can equal 20, even 30 percent of a prescription drug’s list price. But the savings don’t necessarily benefit patients.

Instead, at the pharmacy counter patients often pay a percentage of the drug’s full list price.  For some, the cost “sharing” is unmanageable, leading them to ration or altogether abandon their medication.  Meanwhile, rebates that average $29 billion a year for Medicare Part D alone drive massive profits for pharmacy benefit managers.

But that may all be about to change.  

Calling for the end of “backdoor deals,” the Department of Health and Human Services has issued a proposed rule that would treat rebates as illegal kickbacks under federal law.  Instead, the rule would allow for list price negotiations – straightforward price cuts that translate directly into lower out-of-pocket payments for patients.  

The rule would apply to Medicare and Medicaid managed care programs beginning in 2020.  And research suggests the savings to seniors could be significant:

  • A 2018 report found that applying negotiated drug discounts to patients at the pharmacy counter could save seniors with diabetes more than $350 each year.  
  • Another report estimated that the rule could cut government spending by $78-$98 billion over 10 years and reduce seniors’ Part D out-of-pocket costs by 11 percent.

HHS Secretary Alex Azar has hailed the proposal as “the single biggest step in history ever to drive drug prices down for people.”  Patient advocates are also optimistic.

“For years we’ve watched patients struggle to pay their out-of-pocket costs while pharmacy benefit managers are posting record profits,” noted Lindsay Videnieks of The Headache & Migraine Policy Forum. “We look forward to seeing negotiated rebates and discounts finally work to the benefit of patients.”

To learn more about pharmacy benefit managers, watch “The Middleman.”

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