November 20, 2017 News

STAT: Trump proposal to lower drug prices targets insurer, PBM rebates

November 17

Erin Mershon

The Trump administration is exploring policy changes that could eventually lower the prices Medicare beneficiaries pay at the pharmacy counter.

Although it’s only a small, initial step in that direction, it’s one of the first signals of how the Trump administration is trying to deliver on the president’s promises to lower prescription drug prices.

The proposal likely won’t directly affect the bottom line of drug manufacturers President Trump has repeatedly accused of “getting away with murder” — indeed, by some accounts, they could make more money under the change. Instead, the proposal will more directly affect insurance companies and pharmacy benefit managers, or PBMs — long blamed by pharmaceutical manufacturers for high prices.

The idea is to pass along to beneficiaries some of the behind-the-scenes rebates that PBMs and insurers negotiate with drug manufacturers. Other, smaller changes in the proposal would tweak how Medicare pays for so-called biosimilars, or how quickly the program can start paying for new generic drugs.

Right now, Medicare beneficiaries usually pay copays or coinsurance at the pharmacy counter that are based on the list price of a drug. For a drug that costs $200, a Medicare beneficiary with a 20 percent coinsurance would pay $40 at the counter.

Behind the scenes, that person’s Part D insurer or PBM might have negotiated a discount, perhaps in exchange for an agreement to cover one manufacturer’s drug in place of a competitor’s. The insurer might pay only $150 for the drug — savings it gets to keep, and which insurers say help keep premiums lower for everyone who buys a Part D plan.

The new Trump administration proposal aims to have Medicare beneficiaries pay coinsurance that’s based on that negotiated price, rather than on the list price. Under this example, the beneficiary would now pay $30, not $40.

Sometimes, insurers and PBMs charge pharmacies fees that are separate from the discount and rebates they negotiate with manufacturers. Those, too, could be affected by the policies the Trump administration is exploring.

The administration first highlighted the policy in a fact sheet in January, emphasizing that as the discounts and rebates proliferate, consumers aren’t seeing their own prices fall.


Patients For Affordable Drugs is the only independent national patient organization focused exclusively on achieving policy changes to lower the price of prescription drugs.