PAN Foundation responds to U.S. Department of Health and Human Services’ proposed rule to remove safe harbor protection for drug rebates

The PAN Foundation recently submitted a letter responding to the U.S. Department of Health and Human Services’ (HHS) proposed rule that aims to lower out-of-pocket drug costs for individuals enrolled in the Medicare Part D prescription drug benefit.

This objective is critically important for the millions of Americans living with life-threatening, chronic and rare diseases who are disproportionately affected by high deductibles, copays and coinsurance. PAN acknowledged that the proposed rule is an important first step that could help Medicare recipients and other patients save money on the out-of-pocket costs for their prescription drugs.  

Overview of the proposed rule

The proposed rule would remove the Safe Harbor Protection for rebates that pharmacy benefit managers may receive from negotiating prices with drug companies. Instead, rebates would be passed directly to patients so they can save on their out-of-pocket costs. Alex Azar, the Secretary of HHS, anticipates that these changes could be especially beneficial for seniors on Medicare by reducing the cost of their medications.

Out-of-pocket costs impede access to life-savings medications

Our letter noted that without providing a specific plan for how the proposed savings will benefit patients, out-of-pocket drug costs for Medicare beneficiaries may not be adequately reduced.

According to a recent Kaiser Family Foundation report that evaluated 30 specialty drugs, Medicare Part D enrollees with serious health conditions like cancer, hepatitis C, multiple sclerosis and rheumatoid arthritis face thousands of dollars in out-of-pocket costs. The average beneficiary with one of these conditions will pay $8,100 this year to fill their prescription medications.

As more than 25 million Americans over the age of 60 live at or below 250 percent of the federal poverty level, too many people cannot access and stay on the treatments their healthcare providers prescribe for them. This can have devastating effects on the health and quality of life of these patients and result in higher costs for Medicare as untreated and undertreated patients end up using expensive emergency and inpatient care.

Policy recommendations

To ensure lower out-of-pocket costs for patients, we outlined the following policy recommendations:

1. The Administration should consider using the first dollars from any point-of-sale discounts to offset some, or all, of the out-of-pocket costs that patients pay under the Medicare Part D benefit. While the prices patients pay can be significant, they are a small percentage of the total drug acquisition cost.
2. As the Administration seeks to make prescription drugs more affordable for older Americans, it should also consider modernizing the Medicare Part D prescription benefit by placing an annual cap on out-of-pocket costs and by spreading these costs more evenly throughout the benefit year, through either legislative of regulatory means.

Policy solutions to lower out-of-pocket drug costs for Medicare beneficiaries are urgently needed. In the end, reducing what is paid at the pharmacy counter will help patients ensure that they can start and stay on treatment and better manage their health.

Read the full letter here.