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| House Holds Prescription Drug Hearing as CBO Releases Rebating Rule Analysis |
The House Energy and Commerce Health Subcommittee held a hearing on Thursday to examine prescription drug coverage and spending in Parts B and D of the Medicare program. Among the issues discussed were the Trump Administration’s proposal to implement an international pricing index (IPI) model, authorizing the HHS Secretary to directly negotiate drug prices with manufacturers, financial incentives for plan sponsors to manage high cost enrollees, value-based arrangements in Medicare, binding arbitration, and formulary management and transparency tools.
The hearing included testimony by Medicare Payment Advisory Commission (MedPAC) Executive Director Dr. James Mathews. Representative Gus Bilirakis (R-FL) asked him about MedPAC’s proposal for the IPI model as it relates to the administration’s IPI proposal. Mathews noted that there were a number of potential logistical issues with the administration’s proposal particularly with vendor resources. He added that MedPAC identified issues affecting the ability to calculate international sales rates particularly due to idiosyncratic relationships between manufacturers and other countries governments. However, he said that the MedPAC IPI model would have greater potential to reduce spending for Part B drugs.
Representative Kurt Schrader (D-OR) asked Medicare Payment Advisory Commission (MedPAC) Executive Director Dr. James Mathews about using value-based arrangements to tie reimbursements to actual outcomes. Mathews noted that there is not yet conclusive support of these systems and that the voluntary nature of Part D could cause a potential impediment to its adoption. This is because a plan may enter into an agreement with a manufacturer that is contingent on beneficiary outcomes that may not manifest themselves until after a lapse of a period of years. As Part D is a voluntary benefit and a beneficiary can move from one plan to another year after year, a plan may not see the benefits of its investments in a particular enrollee.
Representative Anna Eshoo (D-CA) asked about the benefits to beneficiaries for rebates. Mathews responded that aligning incentives for plans and manufacturers regarding costs and utilization would have a more direct and immediate effect compared to rebates that have more distorted effects on utilization and cost.
The hearing was held just as the Congressional Budget Office released a report analyzing the Administration’s proposed prescription drug rebate rule, projecting a net cost to the federal government of $177 billion over ten years. That plan would eliminate drug manufacturer rebates in Medicare and Medicaid by prohibiting rebates to pharmacy benefits managers (PBMs) unless they are passed on directly to consumers at the point of purchase. The bulk of the increased spending would come from Medicare, as it would lead drug companies to withhold roughly 15% of current rebate amounts to PBMs in Part D, and that Part D premiums would increase. The report further notes that the proposal is not expected to have an effect on the list prices of prescriptions, but would offer chargebacks. NAHU submitted comments to this proposed rule last month, specifically asking the Administration to delay implementation of the rule until January 2021 due to a number of concerns.
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