Politics ‘Trumps’ Rational Policy Rule Change On Ending Rebates To PBMs For The Medicare Program

The Trump administration announced earlier this year a proposal to eliminate rebates to PBMs in the Medicare and parts of the Medicaid programs effective January 1, 2020. The Trump administration made eliminating rebates a significant part of the American Patients First blueprint initiative launched in May 2018 to reduce out-of-pocket prescription drug costs. Most pharma experts predicted this rule change over time would lower out-of-pocket spending for patients, improve patient adherence to medicines with concomitant beneficial effects to health and economic outcomes, and increase pricing transparency in a part of the pharma sector that has remained very opaque. Then, the announcement in July 2019 that President Trump would not pursue implementation of this PBM rebate rule change. This paper explores the reason behind this about-face, potential policy alternatives President Trump may pursue to reduce drug prices and their adverse consequences, and what should pharma companies do in light of this policy reversal.

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