WASHINGTON — The commissioner of the Food and Drug Administration, Scott Gottlieb, on Thursday suggested that a key federal law on kickbacks could be reinterpreted by the government to help rein in the prices of prescription drugs.

Drug companies are currently being sued by lawyers who believe that the Byzantine system of rebates that flow between pharmacy benefit managers, drug manufactures, and insurers are really kickbacks. The current interpretation of the federal law shields these rebates from legal scrutiny.

But Gottlieb, in remarks delivered at the annual conference of the Food and Drug Law Institute, signaled that might change.

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“One of the dynamics I’ve talked about before that’s driving higher and higher list prices, is the system of rebates between payers and manufacturers,” Gottlieb said. “And so what if we took on this system directly, by having the federal government reexamine the current safe harbor for drug rebates under the Anti-Kickback Statute?”

It is unclear if President Trump will address the matter in a speech on drug pricing he is expected to deliver next week.

The pharmaceutical industry has engaged in a massive lobbying campaign to shift the blame for high drug prices from the manufacturers, who set the list prices, to pharmacy benefit managers and insurers, who help determine how the products are paid for through a system of rebates. It’s an issue that has also vexed lawmakers, who are questioning the “black box” of drug pricing.

In a statement, the Pharmaceutical Care Management Association, which represents PBMs, did not address Gottlieb’s suggestion about changing the interpretation of anti-kickback laws. The group said that “getting rid of rebates would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturer pricing strategies.”

Gottlieb said Trump’s plan will address efforts by brand pharmaceutical companies to make it more difficult to get samples of drugs to make sure the generics are indeed equivalent.

We’re going to be unveiling some new guidance in the next few weeks, as part of the president’s plan, which addresses some aspects of these loopholes that companies exploit when it comes to [this issue],” Gottlieb said.

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Gottlieb said Secretary of Health and Human Services Alex Azar plans to try to bring down drug prices through “a series of changes to the pricing mechanisms in [Medicare] Part D.”

He did not specify what these changes would be, but in a separate statement, Azar said the administration is working on a “comprehensive plan” to bring down the high price of prescription drugs. 

Trump’s budget blueprint included a proposal to move some drugs currently covered under the Part B portion of the Medicare program, which mostly covers inpatient hospital expenses, to the Part D program, which covers outpatient drugs. Drug makers are resisting that idea.

“I can tell you that the framework that the secretary [of health and human services] has developed will dismantle many of the provisions that shield parts of the drug industry from more vigorous competition,” Gottlieb said.

Gottlieb called out companies for lobbying for “rules and restrictions” that have prevented “truly market-based pricing and competition.”

“I feel strongly that this is shortsighted,” Gottlieb said. “It’s hard to defend the principle of market-based pricing if individual firms seek to use legal and political maneuvering to seek temporary advantage by gumming up the rules in their favor.”

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  • All said and done our mutually subsidized healthcare system was highjacked a while ago but we did not realize it. PBMs and intermediaries in the name of facilitation created the current juggernaut. The problem is getting compounded by lack of new drug for masses. What is being brought to the market are Orphan drugs which need to be high priced so that companies can survive and pay for other drug developments. Drugs that could be used by masses are marginally better and limited for a small population and again high priced. Thus brand drug companies are heading to a financial abyss. They do not know how to get around the chosen path.

    With respect to generics the current juggernaut of PBMs and intermediaries is a big problem for the patients. The model needs to change. However, PBMs and intermediaries will fight tooth and nail.

    There is a way and it has to come from Generics. Please review the attached and it might be of interest.

    Improving Drug Affordability for the United States Populous through Alternate Business Models: https://pharmachemicalscoatings.blogspot.com/2018/05/improving-drug-affordability-for-united.html

    Girish Malhotra

  • I’d appreciate an article really explaining the mechanisms of rebates and kickbacks from manufacturers to PBM’s and the lack of sharing these with customers

  • Ask PHARMA why the largest purchaser of Prescription drugs in the world, the US, also pays the highest price per unit per drug of anywhere in the world? Logic says in a free market, generally the largest purchaser can demand the best price. The whole purchasing power of the US needs to be viewed as one purchaser under one fixed formulary. The FDA is in fact the entity that sets the formulary in the US. If the FDA doesn’t approve a drug, it isn’t sold in the US We need to add the piece that is missing, tie a ” maximum allowable cost” to the drug formulary approval process by the FDA. This max cost should be the lowest price charged in the world after all schemes have been removed from the cost. PBM’s do this, inpatient facilities do, buying groups do, and on and on. All these entities today, get paid for their services and those payments, in the form of rebate sharing, go directly into the list price of our drugs. That is the problem. Let us quit playing a whores game and tie a mac cost for a drug into the formulary inclusion guidelines of the FDA our real P and T group in this country and that then determines our fixed formulary. Today, the largest factor people in the US do not get and use their prescriptions is PRICE! Shouldn’t the world’s largest drug market get the best price, not the highest. Part two of my comments center on the fact that we ALSO subsidize most of the rest of the worlds drug costs and have for years and years. Well, in todays world everyone talks about a world economy, let’s be sure again that we are not paying the drug bill for many many countries. This is merely a ploy to have world use of a product even where it isn’t affordable for the users. Just mark up the US list price and that takes care of that problem. Nice

    • James the comment is sensible and surely a viable option (one of many) but for one thing
      It is FEDERALLY illegal. The federal Gov has specifically precluded the OMS from negotiating prices for any drug it pays for AND the FDA is specifically precluded from using cost as requisite for allowing a drug to be approved
      So that leaves Scott’s hands tied on using your theory and resorting to using the 1980’s law that prevents anyone from including rebating into the drug process
      I can only imagine what a nightmare it would be if the FDA had to review pricing and value as part of its decision to allow a drug to be approved in the USA
      Your suggestion, however, IS part of the UK’s NHS approval scheme and there are many US drugs that are not approved in the UK for that reason alone
      Although I think cost is very important we don’t want a scientific agency to be involved in economics and or deciding if someone can or can’t get a drug because they have decided the drug is too expensive or of insufficient value
      When I was with the Senate we bounced about a change to a more value-based FDA approval system and it looks nice on the skin but what do you do when two drugs look very similar clinically but differ only on price? What happens if you were the patient who got poor results on drug A the cheaper approved one and needs access to drug B and was willing to pay the difference if you could access to it BUT the FDA was forced to disallow it because the price or value was not sufficient in comparison to drug A
      I think that we need to allow OMS to negotiate and get rid of the PBM’s and their added costs and allow InsCos and the various agencies to negotiate and turn the rebates back to the InsCos and Gov to allow premiums or costs to lower as a result
      A few have complained that the InsCos would negotiate (and do some of them) and keep the saved funds but that is not historically true. Right now two very large companies have announced they will break away from PBMs and pass the savings on to the premiums so that out of pocket for the cost of coverage will drop
      Think about if ALL InsCos and agencies did that AND since the agencies are public had to make the actual deals public so that all would know what others are paying to be able to cut better deals
      Dr. Dave

  • I have wondered about this for years: must use only one generic for one plan, another plan requires the brand, yet another plan wants a generic manufacturered by yet a different generic manufacturer.

  • FANTASTIC approach
    If we cut the pharm managers and simply had all InsCos and Medicare and Medicaid negotiate directly with each PharmaCo to get prices agreed upon the prices would win for everyone
    Right now the PharmaCos don’t get nearly what they WANT for their drugs because they have to pay the PBMs their kickback. We or our InsCos pay too much because the PBMs take a share as well and the Pharmacy chains and stores are TOTALLY killed by the PBMs so in actuality no one but the PBMs wins here
    Take them out and that eliminates a whole tier who won’t need to be paid any longer
    Surely a provision can be made to allow InsCos to negotiate en-bloc together to get lower prices for everyone while keeping the entire prices going upward to the PharmaCos so they actually make more than currently and are happier
    Dr. Dave

    • Although I don’t disagree with this potential approach, the reason for your particular enthusiasm is a bit misplaced. You seem to be under the impression that InsuranceCos don’t do the same sort of contracting and rebating that PBMs do. Some insurance companies choose to manage their own formulary and some choose to outsource that to a PBM. Those that manage their own do the same things that a PBM would.

      Also blaming PBMs and InsCo for demanding rebates is a little bit of a chicken and egg thing. Would they need to demand contracts and rebates if the PharmaCos didn’t set the prices too high to begin with?

      What is stopping a PharmaCo from lowering their price and saying no rebates?

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