Prescription Drug Rebates On The Rise

Trump administration to eliminate safe harbors for drug rebates to PBMs |  Fierce HealthcareSource: Axios, by Tina Reed

Prescription drug rebates from drugmakers to commercial health plans are steadily increasing, a study published in JAMA Health Forum shows.

Why it matters: This is all part of a system in which drugmakers negotiate to get their product on the formularies of middlemen known as pharmacy benefit managers and health plans.

  • * “While drug rebates can reduce plans’ net costs, rebates do not reduce patients’ cost sharing,” the authors write.

This can ultimately “incentivize drug manufacturers to inflate list prices and PBMs to distort drug formularies to favor high list price and high-rebate therapies,” the authors write.

What they’re saying: This is also an equity issue, particularly for patients buying individual plans.

  • * “We have the sick people paying more than their fair share for the drug and the rebate goes back to the plan to reduce premiums for the healthy,” said Ge Bai, a professor of accounting at Johns Hopkins Carey Business School who was one of the authors of the study.

What to watch: Trump era rules to block rebates for Medicare stalled under the Biden administration.

  • * But the issue has been gaining attention on Capitol Hill, with a bipartisan group of lawmakers pushing to outlaw rebates as part of legislation that would cap the price of insulin, FierceHealthcare wrote.

Commissioner Urges DOJ to Block Anthem/Cigna Merger

CIGNA-AnthemMerger

California Insurance Commissioner Dave Jones is urging the Dept. of Justice to block the merger of Anthem and Cigna. The merger, which is estimated to be worth more than $50 billion, would make Anthem the nation’s largest health insurer. Anthem’s market share would exceed 50% in 28 California counties and 40% in 38 counties. Jones said that the merger would reduce access to quality care, and reduce health insurance affordability. Under California law, the commissioner does not have direct approval authority over the Anthem and Cigna merger since Cigna is domiciled in Connecticut.

At a public hearing on March 29, Anthem executives claimed that the merger would result in $2 billion in savings. But Jones said that Anthem provided only vague and speculative assertions when asked to back up that claim. At the hearing, Anthem would not commit to pass any savings onto consumers through lower prices.

Jones said, “More competition in California’s consolidated health insurance markets is needed, not less. Competition helps restrain prices, provides choice, and improves quality. The Anthem and Cigna merger reduces competition in a market that is already dominated by just four health insurers. It will likely result in reducing consumers’ choices, increased prices, and lower quality care,” he said. Jones provided the following statistics about California in 2014:

  • The four largest insurers controlled 85% of the market.
  • Four insurers controlled 82% of the large group market statewide.
  • Four insurers controlled 88% of the small group market.
  • Four insurers controlled 93% of the individual market.
  • In Covered California, the four largest plans controlled 95% of the individual market in 2014 and 91% of the market in 2015.

Last Updated 05/25/2022

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