Due to the unabated growth of prescription drug prices and the resulting increase in consumer spending, drug prices have become a highly prioritized public health matter. To address this issue, Health and Human Services (HHS) Secretary Alex Azar and President Donald Trump released the American Patients First blueprint, an extensive plan to reduce prescription drug prices and patient out-of-pocket costs.
The blueprint lays out a number of measures to lower drug prices through a focus on the following four strategies:
- Increasing competition
- Allowing for better negotiations for government-sponsored programs
- Lowering out-of-pocket costs
- Incentivizing lower list prices
Although we don’t know exactly how the blueprint will be operationalized, the measures (as written today) will have a significant impact on the current pharmaceutical supply chain and its key players, including drug manufacturers and pharmacy benefit managers (PBMs).
Elimination of manufacturer rebates to PBMs and plan sponsors
Specifically, the proposed elimination of manufacturer rebates to PBMs and plan sponsors could have far reaching impacts on manufacturers’ contracting operations, government reporting, financial forecasting, and channel management.
From a government reporting perspective, the elimination of rebates to PBMs and plan sponsors could significantly change the way manufacturers evaluate Best Price (BP). Although Best Price would continue to require manufacturers to account for total discounts extended to PBMs, the elimination of retroactive rebates would potentially reduce BP forecasting complexity.
In the current landscape, these retroactive manufacturer rebate payments are typically lagged one to two quarters after utilization data is received from PBMs. Manufacturers are required to account for those discounts (including any additional rebates or discounts paid before or after the primary rebate payment) to those respective products and cumulatively report the net price to Centers for Medicare and Medicaid Services (CMS).
Eradicating these rebate payments would decrease the level of effort, time, and resources required to identify the BP (e.g., net price). It would also reduce the quantity of BP restatements submitted to CMS. Ultimately, manufacturer processes utilized to determine BP would be simplified.
This illustrated impact on Best Price provides just one example of how a system without PBM rebates will impact manufacturer processes. HighPoint will be reviewing in detail how a system without PBM rebates can potentially be implemented and the additional impacts (positive and negative) on manufacturers’ contracting operations, government reporting, financial forecasting, and channel management. Stay tuned for an upcoming white paper which will explore this important topic at greater length.
For more insight into the pharmaceutical industry challenges of drug pricing and managed care rebates, contact Heenal Patel.