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Commercial Plans Take Notice: Point-of-Sale Rx Rebates May be Coming for Government-Sponsored Plans

February 14, 2019

Now more than ever, partnering with a truly transparent PBM will help prepare plans for change.

On Thursday, January 31st, the Health and Human Services (HHS) Secretary Alex Azar proposed a new rule eliminating safe harbor protection for arrangements in which drug manufacturers pay rebates to pharmacy benefit managers (PBMs), Medicare Part D plans and Medicaid managed care organizations. Instead, the proposed rule would favor sharing rebates directly with patients enrolled in government-sponsored plans at the point of sale.

HHS contends drug prices are high for patients because drug makers pay millions of dollars in rebates to PBMs for preferred status on formularies and some keep this revenue rather than passing the rebates to plan sponsors or patients. HHS believes this creates a cycle in which some PBMs are incentivized and benefit financially by covering higher cost, highly rebated drugs that may not be the only clinical option available.

Body-copy-pull-quote-blog-boxAccording to Azar, PBM rebates are “a hidden system of kickbacks to middlemen” that increases drug costs for consumers. While this may be the case for some PBMs, it’s certainly not so for EnvisionRx. We agree PBMs should have the capability to share these rebates with patients and payers, reducing costs for the healthcare ecosystem as a whole. It is common sense to pay your PBM to focus on managing benefits and drug cost, and improve outcomes, not to manipulate and keep rebates. Our business model was founded on this premise of transparent pass-through pricing and we already pass earned rebates and pharmacy discounts to plan sponsors, with the option to pass this value onto members.

While individual prescription costs for select patients using brand name drugs that offer rebates may be lower under this proposal, the rule would have no impact on patient costs for brand and generic drugs that offer no rebate, which comprise the majority of medications available. Since government-sponsored plans utilize rebates to keep premiums low and benefits high, the loss of rebate revenue would require all government-sponsored plans to either increase monthly premiums or reduce benefits, resulting in minimal financial impact to plan sponsors.

Additionally, the reduction in out-of-pocket costs means more beneficiaries will never reach the other side of the Medicare coverage gap (“donut hole”). Approximately seven in 10 Medicare beneficiaries will be forced to pay both higher priced coinsurance (25% for covered brand drugs; up to 37% for covered generics) and a higher monthly premium. [1] So while some will save on select transactions, most will pay more overall.

With a proposed implementation of January 1, 2020 and bids for the 2020 plan year due from plan sponsors to CMS in June 2019, it seems unlikely Medicare and Medicaid plans will have sufficient time to thoughtfully adjust 2020 plan designs and premiums or prepare for the operational and technological changes required. While this proposed reform is only for government-sponsored plans at this time, it could affect commercial plans sometime in the future. As a PBM with fully auditable systems, a rapid implementation process and an ability to pass through rebates at the point of sale, there’s never been a better reason to partner with EnvisionRx.


[1] Health and Human Services Department (2019). Fraud and abuse removal of safe harbor protection for rebates.