Brainstorm Health: New Drug Pricing Proposal, Heart Disease, Digital Health Popularity

Good afternoon, readers.

A bit of breaking news going into the evening—some that could, theoretically, have significant consequences for the pharmaceutical industry if implemented.

The Trump administration on Thursday officially recommended major changes to how insurers and pharmacy benefits managers (PBMs) interact when it comes to drug rebates for Medicare. OK, in plainer English: A proposed rule would aim to cut drug prices in Medicare by eliminating (or at least sharply rolling back) the opaque rebate system that rewards high list prices, according to Health and Human Services Secretary Alex Azar.

“This proposal has the potential to be the most sweeping change to how Americans’ drugs are priced at the pharmacy counter, ever, by delivering discounts directly to patients at the pharmacy counter and bringing much-needed transparency to a broken system,” he said.

Political rhetoric aside, the HHS rule does take aim at what’s become an increasingly popular target for drug price reform enthusiasts: A massive discrepancy between “list” prices for drugs, what middlemen such as pharmacy benefits managers (think of groups like CVS and Express Scripts) pay for such treatments, and what’s ultimately paid by consumers at the pharmacy checkout counter.

These very middlemen have been called out in recent months for their potential role in raising prices across the entire health system. Since their negotiations with drug makers occur behind-the-scenes, it’s difficult to say how much rebates on list prices are ultimately passed on to the common patient—versus how much is pocketed by the middlemen themselves. And critics say the entire system encourages drug price gouging, since companies defensively raise their list prices in order to make up for the (untold) rebates they later have to pass on to PBMs and may, ultimately, not make their way to patients.

Thursday’s proposed rule would be limited, targeting only certain legal protections and rebates for these sorts of arrangements, and centered to health plans involved with Medicare. But, if finally enacted, they could sway how private health plans do business, too.

PhRMA, the drug industry’s largest lobbying group, was largely supportive in a statement. “We applaud the Administration for taking steps to reform the rebate system to lower patients’ out-of-pocket costs. Our current health care system results in patients often paying cost-sharing based on the list price, regardless of the discount their insurer receives. We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy,” the organization said.

There will be much more to parse on this proposal in the days to come. One good bet? The drug pricing issue will continue to be front and center during the 2020 presidential campaign.