September 8, 2020

(Washington, D.C.) — A new report, “Negative Economic Impact of Restricting Rebates in Medicare Part D,” by Alex Brill of Matrix Global Advisors (MGA), examines recent evidence showing that prescription drug rebates negotiated by pharmacy benefit managers (PBMs) reduce drug costs and lower premiums in Medicare Part D. The paper concludes that proposed government action to make rebates illegal in Medicare would raise premiums and taxpayer costs.

Click here to read the analysis.

President Trump recently issued an Executive Order (EO) condemning rebates. According to the MGA report, three federal agencies – the Congressional Budget Office, Health and Human Services (HHS) Office of Inspector General, and Government Accountability Office – find that PBM-negotiated rebates actually lower drug spending, lower premiums, and reduce costs for the government.

“PBMs pass more than 99% of the rebates they negotiate from drug manufacturers to Part D plan sponsors. Eliminating rebates in Part D would increase federal spending by nearly $200 billion over the next ten years and amount to a massive government giveaway to drug manufacturers,” said Brill.

The President’s EO directs the HHS Secretary to finalize the retracted rebate rule without raising premiums for Medicare seniors, increasing costs for taxpayers, or leading to higher out-of-pocket costs for patients. As Brill points out in the report, this mandate is infeasible. Indeed, the MGA report demonstrates that actuarial estimates included in the proposed rule align with the CMS Office of the Actuary’s estimates showing increases in federal spending and Medicare premiums.

“The MGA report is clear that the previously proposed rebate rule would not conform to the President’s requirement that it not increase costs for Medicare beneficiaries and taxpayers,” said PCMA President and CEO JC Scott. “Importantly, the proposed restriction of rebates would do nothing to advance the President’s goal to reduce prescription drug prices for Americans.”