Rebates? Strategy from The Football Playbook – The End Around

On July 10, 2019, the White House announced it would abandon efforts to eliminate safe-harbor protections for drug rebates in Medicare Part D and Managed Medicaid.  Regulatory efforts to reduce prescription drug costs continue in earnest. 

I don’t know if it was complacence or poor vision, but I didn’t see this coming.  I failed to discern the implication of the actions proposed by the HHS-FDA Safe Importation Action Plan⁴ and the magnitude of its impact to rebates.

A recent headline containing the words “…drugmakers avoid rebate payments…”¹ in one of my daily news feeds caught my attention and ignited my interest to unravel the facts behind this assertion.

To support American Patients First – The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs⁵, HHS and the FDA issued the Safe Importation Action Plan⁴ on July 31, 2019, which outlines two different pathways to facilitate importation of lower cost pharmaceuticals.  

• Pathway 1is a detailed road map which authorizes demonstration projects focusing on the importation of drugs from Health-Canada.  
• Under Pathway 2, U.S. based pharmaceutical manufacturers would be authorized to import pharmaceutical products sold in foreign countries that have the same manufacturing quality and supply chain integrity as the U.S. FDA approved version, using new NDCs, “ ….potentially allowing them to offer a lower price than what their current distribution contracts require. To use this pathway, the manufacturer or entity authorized by the manufacturer would establish with the FDA that the foreign version is the same as the U.S. version and appropriately label the drug for sale in the U.S.” ³

Safety, supply and demand issues aside, these new NDC’s used exclusively for imported drugs, would potentially allow U.S. manufacturers to avoid paying rebates on lower cost imported versions of the same drugs cited in existing long-term drug rebate agreements in the U.S. markets.  With regards to Pathway 2, HHS further commented “This pathway could be particularly helpful to patients with significantly high cost prescription drugs. This would potentially include medications like insulin used to treat diabetes, as well as those used to treat rheumatoid arthritis, cardiovascular disorders, and cancer.”³ 

Will the Safe Importation Action Plan to lower drug prices be the genesis of a parallel drug supply channel, sans rebates? 

History stimulated my skeptic gene.  Will the administrative burden of the Safe Importation Action Plan add cost, or will these tactics actually reduce drug costs for patients AND payers enough to eliminate the potential for insurance premium increases attributed to lost rebate discounts?  If it works, population health could very well benefit from improved access and outcomes.  Could this be the silver bullet that starts to heal the ailing healthcare system in the U.S.?

Be on the lookout for public commentary, and the OMB review of these proposals.  It should provide some interesting reading and entertaining discussion during this election season!

References:

1. PCMA Smart Brief: https://www2.smartbrief.com/servlet/ArchiveServlet?issueid=772C9343-4C02-434D-B91B-B5323823A656&lmid=archives accessed 20191014, referencing an article in published in BIOCENTURY
2. BIOCENTURY article reference: https://www.biocentury.com/bc-extra/politics-policy/2019-10-08/fda-guidance-aims-loophole-avoid-rebates
3. HHS Announces New Action Plan to Lay Foundation for Safe Importation of Certain Prescription Drugs: https://www.hhs.gov/about/news/2019/07/31/hhs-new-action-plan-foundation-safe-importation-certain-prescription-drugs.html
4. FDA Safe Importation Action Plan:  https://www.hhs.gov/sites/default/files/safe-importation-action-plan.pdf
5. American Patients First – The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs: https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf