While designing their 2020 Medicare Part D plans, insurers and pharmacy benefit managers can assume rebates will still exist, CMS Administrator Seema Verma said in an April 5 memo.
HHS has proposed eliminating drug pricing rebates in Medicare Part D, beginning in 2020, and CMS still is taking comments on the proposal until April 8.
These rebates, which drugmakers pay to PBMs, are negotiated by PBMs to lower the costs of medicines for their clients. These discounts are often confidential and have recently become controversial. Pharmaceutical companies claim these rebates force them to raise the list price of their medications to protect their bottom lines. PBMs argue that they pass on these savings to their clients, and the responsibility for high drug prices lies with the manufacturers who set those prices. The Trump administration has been receptive to the drugmakers' view that rebates create a perverse incentive to raise drug prices.
The proposed rule would effectively alter safe harbor protections for pharmaceutical company rebates. Safe harbor protections shelter drugmaker rebates made to PBMs from anti-kickback statutes.
If the rule to eliminate back-end rebates ends up going into effect in 2020, Medicare will cover 95 percent of a company's losses through a demonstration program, Ms. Verma wrote in the memo.
"If there is a change in the safe harbor rules effective in 2020, CMS will conduct a demonstration that would test an efficient transition for beneficiaries and plans to such a change in the Part D program," she said.
Her memo is in response to questions about how plans should account for the possibility of a change in the safe harbor rules.
Read the full memo here.