Axtria White Paper

White Paper


Proposed Rule to End Rebates to PBMs for Medicare and Medicaid Programs: What Does this Mean for Pharma Companies?

Alex Azar, Secretary of Health and Human Services (HHS), made a significant game-changing announcement to prescription drug pricing during the federal government shutdown that received little attention in the popular press. In short, the proposed rule would eliminate rebates to pharmacy benefit managers (PBMs) in the Medicare and Medicaid programs by January 1, 2020. This change from the Trump administration was not unanticipated. President Trump and his administration spent much of 2018 making various policy announcements to tackle drug prices as a lead-up to the midterm elections because of challenges by the Democrats on making healthcare a primary topic with the voters. Addressing rebates was a significant part of the American Patients First initiative launched in May 2018 as a way to reduce out-of-pocket prescription drug costs. In summary, the Trump administration has focused its attention on instituting policies to control drug prices given the topic’s populist appeal, with growing attention on the issue of rebates and how they contribute to higher patient out-of-pocket costs.

This white paper looks at how rebates to PBMs relate to drug prices from two perspectives: how they are supposed to work versus what actually happens. The paper then shifts to hearing from two very experienced Axtria Principals, each having inside pharmaceutical company experience and working as trusted strategic advisors across numerous organizations in the drug industry, and their responses to key questions on the minds of executives involved in managed markets and their business implications. The paper closes with stating the strategic commercial implications of this proposed drug rebate rule and what pharma companies must do to lead through this major environmental change.

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