Hilary Daniel, BS; Sue S. Bornstein, MD; for the Health and Public Policy Committee of the American College of Physicians *
Financial Support: Financial support for the development of this position paper came exclusively from the ACP operating budget.
Disclosures: Disclosures can be viewed at www.acponline.org/authors/icmje/ConflictOfInterestForms.do?msNum=M19-0035.
Corresponding Author: Hilary Daniel, BS, American College of Physicians, 25 Massachusetts Avenue NW, Suite 700, Washington, DC 20001; e-mail, firstname.lastname@example.org.
Current Author Addresses: Ms. Daniel: American College of Physicians, 25 Massachusetts Avenue NW, Suite 700, Washington, DC 20001.
Dr. Bornstein: 3111 Beverly Drive, Dallas, TX 75205.
Author Contributions: Conception and design: H. Daniel, S.S. Bornstein, J.D. Lenchus, J. Quinton.
Analysis and interpretation of the data: H. Daniel, J.K. Carney, T.G. Cooney, T.L. Henry, J.D. Lenchus, M.B. Southworth.
Drafting of the article: H. Daniel, F. Syed.
Critical revision of the article for important intellectual content: H. Daniel, S.S. Bornstein, J.K. Carney, T.G. Cooney, L.S. Engel, T.L. Henry, J.D. Lenchus, M.B. Southworth, J. Quinton, M.A. Wallace.
Final approval of the article: H. Daniel, S.S. Bornstein, J.K. Carney, T.G. Cooney, L.S. Engel, H.E. Gantzer, T.L. Henry, J.D. Lenchus, B.M. McCandless, M.B. Southworth, F. Syed, J. Quinton, M.A. Wallace, A. Valdrighi.
Administrative, technical, or logistic support: H. Daniel, T.L. Henry.
Collection and assembly of data: H. Daniel.
Recent discussions about the increasing prices of prescription drugs have focused on pharmacy benefit managers (PBMs), third-party intermediaries for various types of employers and government purchasers who negotiate drug prices in health plans and thus play a crucial role in determining the amount millions of Americans pay for medications. In this position paper, the American College of Physicians expands on its position paper from 2016 by offering additional recommendations to improve transparency in the PBM industry and highlighting the need for reliable, timely, and relevant information on prescription drug pricing for physicians and patients.
Milken Institute School of Public Health - George Washington University
December 11, 2019
Consider Safe Harbor Provisions
The ACP does an admirable job of highlighting issues facing the US drug market and offering policy recommendations specifically regarding PBMs. However, these recommendations largely ignore systemic components of the market that could be used to disrupt the unsustainable path that many would agree is our current trajectory. The position paper offers valid points about the structure and role of PBMs, citing the need for transparency in efforts to lower prescription drug costs but falls short in addressing the industry use of safe harbor Provisions as a potential culprit of high costs.These safe harbor provisions protect the current system of list prices and their subsequent rebates from liability under the Federal anti-kickback statute, section 1128B(b) of the Social Security Act (the Act). Whereas such rebates - particularly shielded from public scrutiny - could be considered anti-competitive kickbacks in violation of federal law, these transactions are instead exempted and further protected as proprietary information - to the potential detriment of patients and payers.This is not to say that elimination of these provisions would result in immediate or even short-term savings within the market, however. A CBO score of a now-scrapped proposal by the Trump administration to alter the provisions suggested that costs could increase federal spending by $177 billion over 10 years,1 but largely as a result of manufacturers withholding rebates and maintaining high list prices. While the potential increase has been used to discredit the approach entirely, differing scenarios mentioned in the CBO report cite the potential for $100 billion in savings over the same period.1 Instead, rebates have become an entrenched component of the system, where providers depend on the rebates as revenue and perceived discounts from artificially high list prices. Because of this, providers (rather than manufacturers) opposed revocation of safe harbor provisions for fear of costs,2 rather than acknowledging that a structure with artificially high list prices coupled with modest rebates have resulted in a system with much higher average prices for all participants. As such, any efforts to remove safe harbor provisions should also address the derivation of list prices, or any such mechanisms that benchmark to industry-provided costs that exceed global averages.Again, the ACP recommendations are commendable and should be pursued, however in the absence of fundamental changes to address deliberately complex pricing mechanisms, we may only chip away at increasing costs rather than addressing the underlying causes that enable them. 1. Congressional Budget Office, “Incorporating the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO’s Budget Projections—Supplemental Material for Updated Budget Projections: 2019 to 2029”, May 2019. https://www.cbo.gov/system/files/2019-05/55151-SupplementalMaterial.pdf Accessed Dec 11, 2019.2. HHS suggests getting rid of safe harbors for part D drug rebates. Modern Healthcare Web site. https://www.modernhealthcare.com/article/20190131/NEWS/190139972/hhs-suggests-getting-rid-of-safe-harbors-for-part-d-drug-rebates. Updated 2019-01-31. Accessed Dec 11, 2019.
Sue S. Bornstein MD, Thomas G. Cooney, MD
February 7, 2020
We agree with Dr. Katz’s assertion that fundamental reform is needed to address the complex and opaque pricing mechanisms that underlie the American health system and are responsible for rising prescription drug prices. High consumer prices often pose a barrier to the adherence of recommended treatment plans and, in turn, result in the development of more serious health issues, declines in quality of life, and added financial strain to the nation’s health system.
As emphasized in this and previous policy papers, (1,2) ACP believes that transparency in the pricing, cost, and comparative value of all pharmaceutical products, including disclosure of actual costs to regulators, is paramount in mitigating the rising costs of prescription drugs. Further, the College strongly advocates for stringent government regulation of pharmacy benefit managers (PBMs), including public disclosure of financial relationships between PBMs and pharmaceutical companies. Efforts for more transparent pricing mechanisms should extend to arrangements between PBMs and pharmaceutical companies, including the currently protected rebates.
While we did not specifically address the Anti-Kickback Statute—or any other existing or proposed legislation or regulation—in our policy recommendations, we are acutely aware of the concerns regarding safe harbor protection for rebates paid from pharmaceutical companies to PBMs and have been active on the issue, submitting our own comment letter on the Department of Health and Human Services Office of the Inspector General’s proposed rule to eliminate that safe harbor last year (3). The nature of rebates made after the point-of-sale can artificially raise upfront list prices, resulting in distorted costsharing for beneficiaries, missed savings for the Medicaid program, and perverse profit maximizing incentives for PBMs, which are often paid by insurers based on the magnitude of discount realized. However, as the author noted, it is difficult to predict behavioral changes stakeholders would make in response to the elimination of the rebate safe harbor. Government (4) and independent (5,6) analyses found those with high drug costs due to complex chronic illness may see some relief, while those not utilizing the drug coverage may be burdened with higher premiums for no additional benefit if the safe harbor was eliminated. We contend that efforts to promote price and cost transparency, while important and instrumental to decreasing prescription drug costs, must take into account the effects it would have on federal health care programs and beneficiaries’ access to prescription drugs.
(1) Daniel, Hilary. "Stemming the escalating cost of prescription drugs: a position paper of the American College of Physicians." Annals of internal medicine 165, no. 1 (2016): 50-52.
(2) Daniel, Hilary, and Sue S. Bornstein. "Policy Recommendations for Public Health Plans to Stem the Escalating Costs of Prescription Drugs: A Position Paper From the American College of Physicians." Annals of internal medicine (2019).
(3) Fincher, Jacqueline W. American College of Physicians, April 8, 2019. https://www.acponline.org/acp_policy/letters/acp_comments_hhs_oig_aks_pbm_rebates_part_d_proposed_rule_2019.pdf.
(4) CMS Office of the Actuary. “Proposed Safe Harbor Regulation.” August 2018.
(5) Wakely Consulting Group. “Estimate of the Impact of Eliminating Rebates for Reduced List Prices at Point-of Sale on Beneficiaries.” August 2018.
(6) Milliman. “Impact of Potential Changes to the Treatment of Manufacturer and Pharmacy Rebates.” September 2018.
Sue S. Bornstein MD
Thomas G. Cooney, MD
Daniel H, Bornstein SS, for the Health and Public Policy Committee of the American College of Physicians. Policy Recommendations for Pharmacy Benefit Managers to Stem the Escalating Costs of Prescription Drugs: A Position Paper From the American College of Physicians. Ann Intern Med. 2019;171:823–824. [Epub ahead of print 12 November 2019]. doi: https://doi.org/10.7326/M19-0035
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Published: Ann Intern Med. 2019;171(11):823-824.
Published at www.annals.org on 12 November 2019
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