In anticipation of the possible elimination of safe harbor exemption for drug rebates, Patients For Affordable Drugs encouraged the Trump administration to ensure that any rebate changes benefit patients, first and foremost. You can read the entire letter we sent to the Secretary of Health and Human Services below.

Dear Secretary Azar,

Thank you for your leadership and the work of your team to address the terrible problem of high drug prices. Thank you, too, for the opportunity to engage with you and your staff. As I think you know, we are supportive of many of the proposals in the President’s Blueprint, including the elimination of the safe harbor exemption under Medicare Part D and an end to secret rebates used by pharmacy benefit managers.

Like you, we believe reforms must put patients first. So we are taking the liberty of sharing some principles we believe should guide the implementation of a drug pricing supply chain without rebates. We offer them respectfully for your consideration.

Savings For Patients and Consumers

• To be meaningful, the policy should result in an effective decrease in costs borne by patients/consumers of at least 10 percent across all Part D drugs. This can come in out-of-pocket or premium reductions or a combination. But beneficiaries must experience reduced spending. In all cases, beneficiaries and taxpayers must be held harmless.
• PBMs should have a fiduciary responsibility to act in the best interests of beneficiaries.

List and Net Prices

• The rule must result in reduced list prices by drug companies. If PBM rebates are driving up list prices as Secretary Azar has said, elimination of rebates should directly result in lower list prices.
• There should be full disclosure of net prices negotiated between drug companies and PBMs

Transparency, Fees, and Incentives

• No financial incentives should be paid to PBMs to include a drug on a formulary or as a preferred drug or in step-therapy.
• All fees or mark-ups collected by wholesalers and distributors should be disclosed.
• There should be full disclosure to Medicare of all fees collected by PBMs including DIR fees, bona fide service fees, and any other additional services fees.
• Revenue to insurers from mark-ups or discounts passed through from PBMs should be disclosed.

We acknowledge that to accomplish these principles some amount of leverage in negotiations may be lost because net prices will be transparent and disclosed. We believe, however, that transparency and disclosure will result in a better overall outcome for patients, lower prices, and better informed policymaking. We believe sunshine will expose waste and profiteering that will more than offset the slight loss of leverage.

We also acknowledge that all the major players in the system will earn less revenue and profits–drug companies, PBMs, distributors, and insurers. But there is no way to lower drug prices for patients and consumers without someone making less. We propose the rule allocate reduced revenue based on distribution of revenue as reported, for example, in Health Affairs.

We appreciate the opportunities the Department of Health and Human Services continues to give patient groups to weigh in on policies that will affect the lives of virtually every American. We stand ready to discuss this framework with you further should you care to.

Sincerely,

David Mitchell

President & Founder

Patients For Affordable Drugs

CC: Eric Hargan, Deputy Secretary of US Department of Health and Human Services

CC: John O’Brien, Advisor to the Secretary and Deputy Asst Secretary for Health Policy