The Trump Administration’s latest effort to limit the power of pharmacy benefit managers (“PBMs”) is marred by economic uncertainty and looming legal scrutiny. The Office of Inspector General (“OIG”) within the Department of Health and Human Services (“HHS”) recently released a proposed rule (“proposed rule”) removing safe harbor protection under the Anti-Kickback Statute (“AKS”) for prescription drug rebates (“drug rebates) paid by a manufacturer to Medicare Part D plan sponsors and Medicaid managed care organizations (“MCOs”) or their PBMs. The rule also creates new safe harbor protections for point-of-sale reductions in price and certain PBM services fees.[1] The long-awaited proposed rule follows months of anticipation after the Trump Administration released its May 2018 Blueprint to reduce prescription drug costs.[2]
PBMs in Brief
PBMs, on behalf of health plans, employers, and other entities, negotiate and contract with drug manufacturers to obtain rebates on prescription drugs dispensed to health plan members. By aggregating their collective scale and purchasing power of all health plan or employer group clients, PBMs can negotiate better deals with the manufacturer than any one plan or group operating independently. Rebates are typically negotiated on brand-name drugs that compete with therapeutically-similar brands and generics. These retroactive rebates (after point-of-sale) are based on a multitude of factors, including a drug’s placement in a plan formulary designed by the PBM, and the PBM’s power to increase a manufacturer’s market share for specific drugs by inclusion on a formulary. A manufacturer may provide a greater rebate if its product is included in a “preferred” position on the PBM formulary.
Continue Reading HHS Targets PBMs But May Exceed Its Legal Authority in Proposed Rule Eliminating AKS Protection for Drug Rebates
The growth in prescription drug coverage has led to increased complexity in the delivery and reimbursement of medications. PBMs are organizations which address this complexity by impacting most aspects of the pharmaceutical supply chain.
Recent press reports are speculating that CVS Health Corporation is seeking to acquire the health insurer Aetna. The rumored transaction would create a new type of health care company that doesn’t currently exist: one that combines a commercial health insurer with a retail pharmacy chain and a pharmacy benefit manager (PBM). According to most reports, CVS would pay $66 – $70 billion to acquire Aetna (with Aetna stockholders receiving cash and CVS stock). It’s said that the parties are trying to enter into a definitive agreement by year-end.