The Health 202: One GOP senator is urging the drug industry to make good on lowering prices
The Washington Post
March 6, 2019

Drug company executives indicated last week they would be willing to slash their prices if they no longer were forced to pay middlemen the kind of discounts that many blame for driving up the cost of prescription drugs for consumers.

Now, a first-term Republican senator is trying to turn that pledge into a reality with a new bill banning the practice of “rebates” in which drugmakers pay middlemen in the confusing drug-pricing chain to make sure their drugs are covered by insurers. Sen. Mike Braun (R-Ind.) this week introduced a measure to end rebates negotiated between drugmakers and pharmacy benefit managers in transactions conducted in the private sector.

The proposal would do for private health plans what the Trump administration has already proposed doing for government-sponsored health plans as the president has publicly taken aim at drug prices, to mixed results so far. The Health and Human Services Department in January announced draft rules allowing drug companies to offer discounted prices directly to consumers, aiming to stop the controversial rebate practice. But those rules would apply only to Medicare drug plans and Medicaid managed-care plans.

Braun’s bill would ban rebates in all private plans, including employer-sponsored ones. When the administration’s proposal was announced, HHS Secretary Alex Azar encouraged lawmakers to “get to work on extending this proposal to the commercial market, too.” Here, Braun has done just that.

“In an effort to lower drug prices, President Trump’s HHS is exposing the hidden system of kickbacks to middlemen known as pharmacy benefit managers (PBMs),” Braun said in a statement to The Health 202. “I believe Secretary Azar will support this basic measure that amplifies his efforts to provide greater drug price transparency.”

Braun told reporters he believes drug companies will get on board with his plan because they know the rebate system “doesn’t make sense.”

During last week’s testimony by drug executives before the Senate Finance Committee, Chairman Chuck Grassley (R-Iowa) asked whether their companies would lower prices if the Trump rule applying to public-sector plans is ultimately implemented.  

The executives were reluctant to make firm commitments, but some signaled they would be willing to lower prices if rebates were banned in the private sector, too.

“If the rebates were removed from the commercial sector as well, we would definitely reduce our list prices,” AstraZeneca chief executive Pascal Soriot told Grassley.

In a statement to The Health 202, the company reiterated Soriot’s remarks, saying that if rebates for both private and public plans were eliminated, “we are prepared to reduce list prices by an equivalent amount of rebates less appropriate market based fees to those in the supply chain. This would reduce overall costs to patients and the government.”

Merck head Kenneth Frazier told lawmakers he would “expect our prices would go down if we changed the system again, on the commercial side as well as the Medicare side.”

During the hearing, Bristol-Myers Squibb chief executive Giovanni Caforio said he shared the same position. After a follow-up question, Bristol-Myers Squibb said it remains “committed to working with Congress and the Administration on reforming the rebate system with a focus on what is best for patients.”

After the hearing, Sen. Ron Wyden (Ore.), the committee’s ranking Democrat, called on the seven drug executives to answer in writing whether they would commit to lowering list prices if rebates went down. “Big Pharma is eager to point the finger at the middlemen, and now is their chance to follow through on their promises to be a part of the solution,” Wyden said in a statement last week.

David Mitchell, president and founder of Patients for Affordable Drugs, was skeptical, however. He said while Braun’s bill is a step in the right direction, without specific provisions to require list price reductions, “we cannot trust the drug companies to voluntarily lower list prices.”

“Let’s say a drug is $100 and a rebate is $30. If rebates go away, first we have to compel the drug companies to bring the price to $70, then we have to make sure they don’t start raising prices again willy-nilly,” Mitchell told me.

And the much-villainized middlemen, a trade group for the PBMs, said it would work with lawmakers but pointed the finger at those who pay them the rebates to begin with: drug companies.

“[T]he legislation appears to do absolutely nothing to address the root cause of the problem: high list prices that only the drug manufacturers have the power to set,” J.C. Scott, president of the Pharmaceutical Care Management Association, told The Health 202 in a statement. “Despite drug manufacturers’ rhetoric, their pricing strategies are unrelated to the rebates they negotiate with PBMs.

Mitchell said the bill still highlights the “bipartisan energy” around addressing skyrocketing drug costs.

And Rachel Sachs, an associate professor of law at Washington University in St. Louis, said the GOP senator’s proposal puts the onus on drug companies to act.

Drug companies have been “very successful in demonizing PBMs over the last few years,” she told me. “Now that it looks like Congress is thinking about giving the pharmaceutical industry what they have asked for on PBMs, the pharmaceutical industry needs to step up to the plate and make serious concessions, or they may face more extreme reactions from Congress.”

Braun said his bill, dubbed the Drug Price Transparency Act can start to bring transparency to an industry that has “given us a system that is as broken as one can be.”

“This bill doesn’t outlaw PBMs. It doesn’t even outlaw rebates. What it’s going to do is shed light on the process so they’re not going to be able to get by with the argument that there’s room for a whole other layer of a middleman,” Braun said. “You don’t need it.”