For All The Palace Intrigue, Rebate Rule, IPI Go To OMB For Review
Executive Summary
For all the rumors of political infighting, the two cornerstones of the Trump administration’s blueprint on drug pricing are in the final phase for review.
The Trump administration’s two signature efforts to address drug prices and out of pocket costs are now pending review at the White House Office of Management and Budget.
The final rule eliminating the safe harbor for drug rebates in Medicare Part D and Medicaid managed care was received by OMB on 10 June. Prior to that, the Centers for Medicare and Medicaid Services formally notified Medicare Part D insurers that there would be no changes to the rebate safe harbor before 2020 bids to provide drug benefits were due 3 June. (Also see "CMS Offers Part D Plans Financial Backstop If Rebates Eliminated In 2020" - Pink Sheet, 5 Apr, 2019.)
Less then two weeks later, the International Pricing Index for drugs in Medicare Part B “proposed rule” is under review at OMB after being received 20 June. The IPI would index prices for Part B drugs to international prices over a five-year period on a sliding scale. (Also see "Medicare Part B International Price Index Could Result In 25% R&D Cuts – Study" - Pink Sheet, 13 Jun, 2019.)
The progress of the two rules to the final bureaucratic phase – review by the executive branch – comes as a surprise. There have been rumors for months of palace intrigue involving the White House and HHS pitted against one another and that HHS is losing those battles.
If the rumors are true, HHS just ratcheted up the tensions by forwarding the rules. Of course, the regulations could languish in the palace dungeon if the White House is as against the two proposals as has been assumed.
However, if the two groups of policy makers are more aligned than currently assumed or have come to a compromise, the rules could be unveiled at any time.
The advancement of the rules come just as the White House issued an executive order on price transparency in health care. The EO is focused on hospital charges and makes no mention of prescription drugs or drug pricing. Instead the order requires HHS to issue proposed regulations within 60 days that would require hospitals to make public “standard” charge information including “charges and information based on negotiated rates and for common or shoppable items and services.”
While the price transparency EO has been a concern, the drug industry has been more keenly focused on the IPI and rebate rule. HHS Senior Adviser for Drug Pricing Reform John O’Brien spoke at a Politico event on biosimilars and gave no hint that the IPI proposal was moving anywhere.
“We got some good feedback on ways not only to share those savings or recoup a portion of the discounts drug companies are voluntarily giving overseas so that they could benefit American tax payers,” O’Brien said of the advance notice of proposed rulemaking. “The next step after any ANPRM on the road to the Federal Register would be a NPRM.”
On the rebate rule, O’Brien seemed to demur.
“Unfortunately, the use of rebates walls or bundling arrangements could lead to a situation where it may make more sense for a payer to favor the reference product even if the biosimilar was given away for free and if we have a market where the biosimilar is essentially just a stalking horse for a larger rebate that doesn’t get shared with patients and doesn’t bring their out of pocket costs down, well never have the biosimilar competition,” O’Brien said in explaining the current challenges to a vibrant biosimilars market.
He was then asked how ending the safe harbor would affect the market. “That’s just one piece of it. There are number of things we’re looking at,” he responded.
So where do things stand now? Of the two regulations, the rebate rule is the more immediate issue given that it is in final form. The White House is reportedly against it because of the nearly $200bn cost projections over 10 years from two government entities – CMS actuaries ($196bn) and the Congressional Budget Office ($177bn).
Assistant to the President and White House Domestic Policy Council director Joe Grogan has previously expressed interest in copay caps for beneficiaries. The rebate rule would fail to deliver that kind of expensive outcome except for a legislative slight-of-hand where the rule could be implemented and subsequently blocked by legislation and the scored savings could be transferred to paying for something like limits on out of pocket caps.
On the IPI, Grogan was against it when he was the associate director for health programs when at OMB. Senate Finance Committee Chair Chuck Grassley (R-IA) publicly opposed the IPI for the first time, signaling the rule may not have a long life if in fact it is ever cleared by OMB.
Now that HHS has forwarded the two transformative rules to OMB, the ball is back in the White House’s court. The palace intrigue continues.