Please allow us 24hrs to upgrade your status, you will recieve an email when your account has been verified, please contact 1.800.427.6568
On Friday the Trump Administration announced its “American Patients First” proposal to make drug prices more affordable and reduce out of pocket costs. While the need to reduce costs and create better access to medications is universally acknowledged across the healthcare continuum – physicians/providers, drug manufacturers, PBMs, wholesalers, pharmacies, patients, and payers – an effective solution(s) is less readily apparent and much more difficult to implement. The myriad of moving parts and market participants makes any reform effort a challenge and the lack of substantive change announced during Friday’s presentation reflects this reality. The proposed reforms were somewhat vague and didn’t describe any truly impactful near-term changes, however work remains ongoing on several topics.
The President called on the Administration to propose new strategies and take immediate actions across several areas, including:
– Improve competition and end the regulatory gaming process (getting more products to market and stop gaming – ex. Abuse of REMS programs)
– Support better negotiation of drug prices (value based purchasing, more power for Part D programs to negotiate, reduce foreign free-riding)
– Create incentives for lower list prices (make pricing more transparent, change PBM fiduciary status, etc)
– Lowering consumer out of pocket costs
For the pharmacy benefit managers (PBM), the expectation was for more dramatic or heavy handed reforms. For the most part, however, these didn’t materialize (at least for the near/intermediate term). Some potentially positive take-aways related to the PBM space included:
– Increasing access to biosimilars through innovation and enhanced competition – this would be good for both PBMs and patients.
– Experimenting with value-based purchasing models in federal programs – Some of these already exist in certain high cost markets like Hepatitis C or PCSK9 cholesterol reducers.
– Moving certain medications from Medicare Part B to Part D – we’re already seeing this on the private insurance side with the movement of high cost meds out of the medical benefit and into the pharmacy benefit where there is more cost control potential.
Rebates were a major concern heading into Friday’s announcement. There are many questions around whether rebates are causing increases in drug list pricing (or is price taking causing rebates to rise? – a similar argument can be made for copay assistance programs), whether Part D programs should prohibit rebates, etc. The concern around rebates for PBMs involves PBM profitability. Beyond rebates, PBMs make money in many other areas including spread pricing, admin fees, clinical programs and specialty pharmacy/mail order dispensing. Elimination of rebates would have been a negative for PBMs, but the PBM revenue model would allow for adjustments to make up for that loss of income. The loss of rebates would have a modest negative impact on PBMs, but could potentially be a greater negative for plan sponsors who are currently receiving a large portion of rebate value. The loss of rebate revenue would likely lead to increased premiums for employer based plans, as well as Medicare Part D plans.
Another topic of interest for PBMs in the blueprint was the discussion around the potential impact of imposing ERISA fiduciary status on PBMs. PBMs are currently not fiduciaries, but rather serve clients under a contractual arrangement. This change, while highly unlikely in the near or intermediate term, would be a negative for PBMs (from a profitability perspective due to transparency and pass through requirements). Several court cases have solidified the PBMs position as not being a fiduciary, so we expect little traction on this front going forward.
Access the full report: American Patients First – The Trump Administration Blueprint to Lower Drug Prices and Reduce Out of Pocket Costs (May 2018). The report provides more color around specific areas of interest/focus for cost savings potential and how savings might be achieved.
Contact your GBS broker with any questions.
Since 1989, we have been building partnerships by providing reliable, quality service. As the region’s largest benefits firm, we represent local and national companies, school districts, associations, and government entities.Contact Us