HHS Chief Alex Azar is now urging Congress to nix drug rebates entirely. But is that what he really wants?

U.S. Capitol at dusk
HHS Secretary Alex Azar called on Congress to shake up drug rebating. (Pixabay)

Last week, analysts figured the Trump administration's proposal to shake up pharma rebating wasn't as radical as it might have been. After all, it just applied to government programs. But on Friday, HHS Secretary Alex Azar doubled down, calling on Congress to extend the idea into commercial insurance.

But is that what Azar really wants? That change wouldn't be easy for Congress to pull off, Bernstein analyst Ronny Gal told FiercePharma. And in urging Congress during a speech at the Bipartisan Policy Center, Azar may have been putting pressure on payers to voluntarily move away from rebates.

Azar's speech came a day after HHS rolled out a plan to scrap rules that currently exempt rebates from federal kickbacks laws and instead provide “safe harbor” protections to discounts for patients and a fee-based payment system for PBMs. The current system of behind-the-scenes rebating has incentivized higher prices, administration officials have said, and the proposal could put a check on growing prices.

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The administration's proposal, which analysts saw as aimed at PBMs, only suggested changes to Medicare Part D and Medicaid, however. Revamping drug rebating overall would be a more ambitious effort. 

At the Bipartisan Policy Center, Azar said "Congress has an opportunity to follow through on their calls for transparency, too, by passing our proposal into law immediately and extending it into the commercial drug market."

RELATED: An end to rebates as we know them? HHS plan would punch PBMs, but pharma might benefit 

Speaking with FiercePharma, Gal said Azar’s speech is really aimed at payers. In essence, in calling on Congress to make the change, the HHS secretary was urging payers to switch the entire market away from rebates, not just Medicare and Medicaid plans.

Besides, the analyst said he's “not quite sure how Congress writes a law that says we’re going to regulate how commercial insurance works.” The government has already indicated it would pursue an effort beyond government insurance markets, Gal said.

Even after HHS released its proposal last week, Gal wrote that his team believes "changes to the rebate model could spill into non-Part D segments, causing greater impacts to PBM profitability."

RELATED: Azar challenges Congress to expand drug rebate reform to commercial market

Drugmakers were all for the proposal last week. Stephen Ubl, president and CEO of pharma's top trade group, PhRMA, said the organization applauds the administration's effort to reform rebates.

"Our current health care system results in patients often paying cost-sharing based on the list price, regardless of the discount their insurer receives," he said in a statement. "We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy.

“This proposal would also help to fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers favoring medicines with high list prices," Ubl added.

But the PBMs pushed back quickly. CVS said "while PBMs have become a convenient target in the fight against skyrocketing drug costs, in reality they serve as a last line of defense for the consumer." The association that represents PBMs, the Pharmacy Care Management Association, said it's concerned "eliminating the longstanding safe harbor protection for drug manufacturer rebates to PBMs would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries."

House of Representatives Speaker Nancy Pelosi also criticized the idea, saying it could increase premiums and boost total out-of-pocket costs for Medicare beneficiaries. 

"Under the Trump Administration’s proposal, Big Pharma could see even bigger profits and even less restraint on what they charge seniors," she said in a statement.

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