DOSE OF REALITY: UNPACKING THE REBATE RULE’S BIG PHARMA ORIGINS

Little Surprise Big Pharma Bailout That Would Hike Medicare Premiums Was A Drug Company Idea

The Origins of a Big Pharma Bailout

Would you be surprised to learn a controversial idea to hand Big Pharma a more than $100 billion bailout while increasing Medicare premiums and costing taxpayers billions originated with a Big Pharma company?

A look at the origins of the Rebate Rule, aka Big Pharma bailout, reveals the extent to which the misguided policy idea originated with and has been championed by drug company Eli Lilly.

In a 2017 comment letter to the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS), Eli Lilly encouraged the OIG to target rebates negotiated by pharmacy benefit managers (PBMs) with pharmaceutical manufacturers — and outlined policy ideas for how to do so.

Eli Lilly expressed the company’s desire to see policymakers “promulgate new or modified regulatory safe harbors and/or a Special Fraud Alert related to remuneration provided by manufacturers to pharmacy benefit managers (PBMs) … [W]e encourage OIG to consider the following principles already enshrined in multiple other Safe Harbors to guide the agency in formulating a PBM Safe Harbor.”

In their recommendations, Eli Lilly pushed for a fixed-price model for PBMs and included suggested language that would have changed existing regulations from allowing PBMs to charge a fixed price to their customers to requiring PBMs to charge a fixed price.

Those ideas came to be reflected in an HHS policy known as the Rebate Rule. The regulation, proposed in 2019, would have removed safe harbor protections for rebates, which act as the only existing check on Big Pharma’s power over pricing.

Big Pharma’s Support for the Rule

The Rebate Rule was introduced in 2019 under the direction of HHS Secretary Alex Azar, who was the president of Eli Lilly prior to becoming a member of the administration.

A report from the Campaign For Accountability notes Secretary Azar critiqued PBM rebates while he was president of Eli Lilly and continued to criticize them after becoming the head of HHS.

When the Rebate Rule was introduced in 2019, Azar’s successor at Eli Lilly, David Ricks, joined the wider pharmaceutical industry in praising and promoted the measure. On a February earnings call, Ricks spoke of the potential impact of the rule: “While it’s still a proposal, we see this as … a win for patients.” Ricks also penned an op-ed in USA Today in June where he claimed that consumers should forget that the Rebate Rule “would cause federal spending to rise” because the rule was “the quickest way to lower consumers’ out-of-pocket costs for medicines.” In fact, according to estimates, the Rebate Rule would increase out-of-pocket costs by as much as $36.5 billion.

In addition, the government’s own actuaries found the measure would increase premiums for Medicare Part D beneficiaries by at least 25 percent, raise federal spending by more than $200 billion and hand Big Pharma a massive bailout in the form of increased overall drug spending.

The combination of negative impacts for American seniors and taxpayers — combined with the windfall for Big Pharma — led the administration to make the decision to overrule Azar and withdraw the Rebate Rule in the summer of 2019.

The Reboot of a Misguided Rule

Last Friday, the administration rebooted the Rebate Rule via White House executive order. In announcing the return of the misguided rule, President Trump captured its foremost champions best:

“We have a lot of respect for our great pharmaceutical companies, drug companies… They are actually in favor of the Rebate Rule.”

The Rebate Rule is a key component of Big Pharma’s blame game to evade responsibility for out-of-control drug prices, would eliminate a key negotiating step that serves as the only real check on the pharmaceutical industry’s unilateral control over prices and would hand the industry a more than $100 billion bailout — it’s little wonder Big Pharma supports the rule and even less of a surprise it was an idea from one of their own in the first place.

Learn the facts about the Rebate Rule HERE.