CBO Confirms: Rebate Rule Comes At Tremendous Cost to Seniors And Taxpayers

Nonpartisan Analysis Projects HHS Proposal A $187 Billion Budget-Buster That Would Hike Premiums On Seniors

Washington, D.C. – The Campaign for Sustainable Rx Pricing (CSRxP) today released a statement in response to the Congressional Budget Office’s (CBO) release of an analysis on the U.S. Department of Health and Human Services’ (HHS) proposed Rebate Rule:

“The CBO’s analysis reinforces the fact that the Rebate Rule is a misguided regulation that will hurt American patients and taxpayers,” said CSRxP executive director Lauren Aronson.  “The proposed rule hits seniors, the disabled and taxpayers with premium hikes and nearly $200 billion in federal spending without any guarantee it will curb rising drug prices.”

The CBO budget projections concluded the impact of the Rule would include:

• $187 Billion in Additional Federal Spending. That total includes an estimated $177 billion price tag for Medicare and Medicaid under the initially proposed rule, plus an estimated $10 billion cost for the loss-assumption program announced by CMS on April 5, 2019. (Congressional Budget Office, Incorporating The Effects Of The Proposed Rule On Safe Harbors For Pharmaceutical Rebates In CBO’s Budget Projections, 5/2/19)
• Increased Premiums for Part D Beneficiaries. CBO found that if “rebates were no longer paid directly to plans, Part D premiums would rise.” (Congressional Budget Office, Incorporating The Effects Of The Proposed Rule On Safe Harbors For Pharmaceutical Rebates In CBO’s Budget Projections, 5/2/19)
• Added Costs and Premium Hikes to Remake the System. The CBO also concluded “that no current system could both meet the proposed rule’s standards” to facilitate up-front price discounts on prescription drugs. CBO estimates the cost of remaking the system to accommodate volume-based discounts would increase premiums for Part D beneficiaries by an additional percent. (Congressional Budget Office, Incorporating The Effects Of The Proposed Rule On Safe Harbors For Pharmaceutical Rebates In CBO’s Budget Projections, 5/2/19)

The CBO analysis bolsters findings from the Centers for Medicare and Medicaid Services (CMS) which determined that the Rebate Rule would result in:

• A 25 Percent Hike In Premiums For Medicare Part D Recipients. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)
• $197 Billion In Additional Federal Spending. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)
• A Massive Bailout For Big Pharma In The Form Of $137 Billion In Increased Drug Spending. (Center For Medicare & Medicaid Services Office Of The Actuary, Memo On Proposed Safe Harbor Regulation, 1/31/19)

“Not only does the Rebate Rule reward Big Pharma for its anti-competitive tactics, there is nothing in the rule that guarantees that drug manufacturers will lower prices by the full amount of existing rebates,” Aronson continued.  “Big Pharma’s track record proves that given the ability to raise prices, they will do just that.”

“The administration has put forward several commendable proposals that would curb rising drug prices by bringing more transparency and competition into the market,” Aronson added.  “We urge the administration to focus on those market-based solutions and abandon the Rebate Rule in light of the mounting evidence of its negative impact on seniors and taxpayers.”