Drugmakers Weigh CMS Plan to Apply Rebates and Price Concessions at Point of Sale

Posted 23 January 2018 | By Zachary Brennan

Drugmakers Weigh CMS Plan to Apply Rebates and Price Concessions at Point of Sale

Industry groups BIO, PhRMA and AAM, as well as AstraZeneca, Pfizer and Boehringer Ingelheim have offered comments on several proposed policy changes coming in 2019, and first announced in November by the Centers for Medicare & Medicaid Services (CMS).

Nearly all of the commenters offered opinions on one of CMS’ requests for information pertaining to a potential policy to apply some manufacturer rebates and all pharmacy price concessions to the price of a drug at the point of sale.

Background

CMS notes that Part D sponsors and their contracted pharmacy benefit managers (PBMs) have been increasingly successful in recent years at negotiating price concessions from pharmaceutical manufacturers, network pharmacies and other such entities.

Manufacturer rebates, which comprise the largest share of all price concessions received, have accounted for much of this growth, CMS said.

Between 2010 and 2015, the amount of all forms of price concessions received by Part D sponsors and their PBMs increased nearly 24% per year, about twice as fast as total Part D gross drug costs.

“When manufacturer rebates and pharmacy price concessions are not reflected in the price of a drug at the point of sale, beneficiaries might see lower premiums, but they do not benefit through a reduction in the amount they must pay in cost- sharing, and thus, end up paying a larger share of the actual cost of a drug,” CMS said.

The agency sought comment on requiring Part D sponsors to include at least a minimum percentage of manufacturer rebates and all pharmacy price concessions received for a covered Part D drug in the drug’s negotiated price at the point of sale.

Comments

Industry group BIO said it was encouraged by the proposal, as it believes patients should see direct benefit from the rebates negotiated by health plans and PBMs in the form of reduced cost-sharing.

However, BIO expressed reservations that the policy as proposed may lead to unintended consequences, including cross-subsidization of competitors in a class.

“For example, the proposed methodology may create instances in which the average rebate may be higher than what an individual manufacturer is offering for one drug, but lower than what another manufacturer is offering for another drug. In the latter instance, this could create a scenario where one manufacturer’s high rebates could subsidize other products across a therapeutic class. Additionally, there may be instances in which there are single drugs in a specific category or class, thereby exposing confidential information,” BIO said.

But the group also said CMS could base point-of-sale rebate amounts on manufacturer-specific retrospective data points to “help to better shield more recent proprietary rebate information.”

Similarly, Pfizer said it “supports the concept of passing through some level of manufacturer/plan-negotiated rebates at the point-of-sale so that Medicare beneficiaries can more directly benefit from the significant price negotiations,” though the company also “has concerns.”

Pfizer said CMS should decide on a process that does not result in frequent or significant fluctuations in the price beneficiaries are faced with at the pharmacy counter. The company also is seeking ways to protect commercially sensitive drug cost data and ensure the process is “carefully constructed to minimize the reporting and operational burden on plans, pharmacies, manufacturers and CMS.”

Boehringer Ingelheim called on CMS to reconsider the described methodology for prospectively calculating the applicable average rebate amount.

BI said it “is concerned that providing good faith estimates of the point-of-sale rebate amounts for the upcoming payment year (instead of using historical rebate experience) without opportunities to reconcile estimates has the potential to add administrative burden to plans and manufacturers."

AstraZeneca, meanwhile, said it paid in excess of $5 billion in contractual obligations in the US and that it is “aligned with PhRMA’s position that CMS should consider requiring a portion of negotiated manufacturer rebates to be passed through to beneficiaries at the point-of-sale to, most importantly, improve patient affordability.”

The company recommends that CMS continue to explore how voluntary innovative payment arrangements may improve patient affordability, including at point-of-sale.

Peter Bach, MD of Memorial Sloan Kettering Cancer Center, Stacie Dusetzina, PhD from Vanderbilt University Medical Center and Rena Conti, PhD  of the University of Chicago also discussed their JAMA paper from August on the association of price rebates with out-of-pocket and federal spending.

The researchers pointed to the issue under the current design whereby a full treatment course with Gilead’s Harvoni (ledipasvir/sofosbuvir) would cost a beneficiary nearly $2,000 more out of pocket than a similar treatment course with Merck’s Zepatier (elbasvir/grazoprevir), despite the treatments having similar net prices.

“Instituting point-of-sale rebates lowers the out of pocket costs for medicines among those beneficiaries who take them,” they wrote. “This means the policy change would potentially provide substantial financial relief for those beneficiaries who take expensive medications. In exchange there would be a small rise in premiums, a tradeoff that would raise costs for all beneficiaries (likely by a small amount) and for Medicare (which pays the majority of premiums).”

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