Health Law & Policy
| Feb 07 2019

What the HHS Proposed Rule Means for Employers

Late last week, HHS released a proposed rule to end rebates paid by drug manufacturers to insurers and pharmacy benefit managers (PBMs) for Medicare Part D and Medicaid managed care plans. Instead, the rule would create a new path for passing through rebates directly to patients at the point of sale. And, a new safe harbor would be created to allow for fixed fee services between manufactures and PBMs that meet certain standards.  This proposal aims to bring transparency to the system and lower out-of-pocket prescription drug prices for patients.

This Kaiser Health News Article sets forth the winners and the losers under this rule. But you’ll notice, employers aren’t mentioned in either list – that’s because the proposal changes the rules for federal programs, not private insurance. Though, HHS officials acknowledged private insurers may follow suit.

As David Dross pointed out in a prior post, this rule “…could have a major impact as rebates have become both a chief cost control tool and a flashpoint between payers, pharma companies and PBMs. While this move would directly affect transactions involving Federal payment (e.g., for Medicare and Medicaid enrollees), the practical impact may be quite broad.” At a minimum, the proposal could trigger major cost shifting to the private sector.

David advises that employers “consider PBM contracts which limit pay to disclosed transactional fees taking into account savings generated – akin to the Ohio Medicaid model. If implemented correctly, this model might address a host of issues related to drug purchasing which trouble employers today.”

We will continue to provide updates on this issue and highlight considerations and action items for employer plan sponsors.

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