Battle Over Medicare Part D Rebates Begins Ahead of Obama Budget

DATE: January 28, 2015

Nearly 400 organizations, including a coalition whose members include the pharmaceutical industry and insurers, have written an open letter to the U.S. House of Representatives to warn against forcing drug makers to give Medicare rebates to low-income beneficiaries.

Led by the Council for Affordable Health Coverage, the coalition missive arrives shortly before the Obama administration releases its annual budget, anticipating that the White House will again seek to propose mandated Medicare Part D rebates. In the fiscal year 2015 budget proposal, the administration forecast that such rebates could save $117 billion over 10 years.

The notion was already broached last week when AARP flagged its support for rebates during testimony before a congressional committee and also made a point of saying it backs the Medicare Drug Savings Act. The bill was introduced earlier this month by U.S. Senator Amy Klobuchar (D-Minn.) and would require the federal government to negotiate discounts and seek rebates for Medicare Part D.

In their letter, the organizations maintain that Medicare Part D “is working” and point to data indicating overall costs and beneficiary premiums are lower than what had been forecast. But “a mandatory Part D rebate could increase beneficiary premiums, jeopardize access and patient adherence to needed medicines, while increasing Medicare spending on other more costly medical services,” the letter states.

The organizations, which issued a similar letter two years ago, claim that studies have estimated Part D premiums for most Medicare beneficiaries would rise by 20% to 40% and that many could not afford such increases. They also argue costs would shift to others, notably employers, and weaken incentives for the pharmaceutical industry to develop medicines.

Among the members of the Council on Affordable Health Coverage is the Pharmaceutical Research & Manufacturers of America, the industry trade group, as well as a trade group for pharmacy benefit managers and some large insurers. The groups that signed the letter include organizations that represent patient groups, businesses and seniors, among many others.

To what extent the campaign will be successful is uncertain, but previous efforts to mandate Part D rebates have not gained sufficient traction. However, given recent price hikes for many medicines and the ensuing controversy, sentiment could change. A recent analysis found that prices for brand-name drugs rose 14.8% last year and 4.9% for generics.

While these increases represent averages for numerous prescription drugs, there is clearly an upward trend, which has garnered added scrutiny among public and private payers, as well as some members of Congress. Whether or not timing is everything, perhaps rising costs may prompt some legislators to take a closer look at tools that can be used to keep price hikes in check.

See the original article on the WSJ Pharmalot website.