In an effort to lower prescription drug costs, California lawmakers have sought ways to ease the high cost for patients suffering from life-threatening and chronic conditions, including cancer and many others. Recent legislation in California has helped increase transparency around prices, but more action is needed.
The U.S. Department of Health and Human Services recently proposed an action that deserves support. Prescription drug rebates, intended by drug manufacturers for consumers, but most commonly swept up by middlemen, are rightfully under the microscope.
The current practice of drug pricing isn’t as easy as you might think. Most consumers envision a scenario where the manufacturer produces a drug, then sets the wholesale price for pharmacies with the consumers and insurers paying the retail cost according to the health insurance coverage.
In reality, insurers hire middlemen called pharmacy benefit managers, or PBMs, to oversee medication programs, including employers and federal and state governments who provide drug coverage through Medicare and Medicaid. This means the PBMs negotiate the drug prices consumers pay — and determine who gets the drug rebates that manufacturers might offer.
HHS Secretary Alex Azar and Inspector General Daniel Levinson have proposed a regulation to incentivize and lower list prices and reduce consumer out-of-pocket spending on prescription drugs. Their proposal creates a new regulation that will protect any discounts offered to patients at the pharmacy counter, meaning the patient receives the rebate – not the PBM.
If enacted, the regulation would motivate the industry to move from the rebate system — too often hidden from consumers with middlemen pocketing any savings — and shift to a system that offers real, obtainable discounts to the patient at the pharmacy counter.
The current rebate system is designed by pharmaceutical companies to increase the availability of new, innovative drugs that are improving lives, but the maze of drug pricing, with PBMs negotiating prices and rebates, has resulted in higher drug prices for consumers. By removing the ability for PBMs to retain any rebates, it will drive down the cost at the pharmacy counter for consumers. The International Cancer Advocacy Network, known as ICAN, fully supports this effort and the potential of some financial relief for many of our patients.
From the perspective of patients, this new regulation from HHS on drug pricing ensures that patients will receive the intended savings and remove the hidden layer that has added to increased expense for patients. We applaud this move toward lower drug costs and increased access for all patients. We urge California policymakers to take further action to eliminate PBM rebates for all insured Californians.
Ray Adler is a San Diego resident and a volunteer with the International Cancer Advocacy Network, a research advocacy organization working to expedite the anticancer drug pipeline worldwide.
