WASHINGTON — The Trump administration on Wednesday abandoned one of its signature drug-pricing efforts: a ban on many of the rebates that drug companies pay to pharmacy benefit managers under Medicare.
A White House spokesman confirmed the news to STAT after it was first reported by Axios.
“Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” spokesman Judd Deere said.
While the White House had argued eliminating rebates would result in drug manufacturers charging lower list prices, the proposal has been controversial since its unveiling in January. Drug manufacturers had largely supported it, while middlemen known as pharmacy benefit managers and insurers were vocally opposed.
The news led to an immediate uptick in stock prices for PBMs: CVS (CVS) shares were up 7% in early trading, and Express Scripts (ESRX) shares increased by 10%. Drug makers such as Pfizer (PFE) (PFE) and Merck (MRK) were down slightly.
Budget projections showed the rule could cost the federal government roughly $177 billion in the next decade, and other policy experts worried the rule would lead to higher premiums for Medicare beneficiaries.
Health secretary Alex Azar said in January that the proposal had “the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever.”
The decision to roll back the proposal is a victory for Joe Grogan, a former White House budget staffer who now chairs the Domestic Policy Council. While Azar favored the rule, Grogan had reportedly opposed it over cost concerns.
Despite reports of conflict between the two top drug pricing advisers, Grogan and Azar appeared jointly on Capitol Hill this week to encourage Republican senators to finalize a bipartisan compromise package to lower prescription drug costs.
“Secretary Azar is fighting alongside President Trump to lower prescription drug costs and protect America’s seniors,” an HHS spokeswoman said in a statement. “President Trump and Secretary Azar are taking bold action to end foreign free riding, examine how to safely import lower-cost prescription drugs, empower patients with meaningful transparency, and the list goes on.”
Deere, the White House spokesman, also emphasized in his statement that the White House remains eager to lower prescription drug prices.
“The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline.”
The rebate rule’s abandonment could put more pressure still on the other drug pricing concept the Trump administration can enact without the help of Congress: a proposal to use an index of foreign drug prices to cap U.S. payments for physician-administered drugs. The pharmaceutical industry and many conservative groups have vocally opposed that proposal, known as the international price index, often on the grounds that it would implement “socialist” price controls.
The rebate rule’s withdrawal is the second major development this week for the administration’s prescription drug policy. On Monday, a federal court ruled the White House could not implement a rule forcing pharmaceutical companies to disclose a drug’s list price in television ads.