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ASHP Comments on Rebates Safe Harbor Proposed Rule

Department of Health and Human Services

April 8, 2019

[Submitted electronically to]
Office of Inspector General
Department of Health and Human Services
Cohen Building, Room 5527
330 Independence Avenue SW
Washington, DC 20201

RE: Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees.

ASHP (American Society of Health-System Pharmacists) is pleased to submit comments to the U.S. Department of Health & Human Services (HHS) regarding the proposed rule to revise the safe harbors for rebate arrangements related to prescription drugs. ASHP represents pharmacists who serve as patient care providers in acute care and ambulatory settings, including hospitals, health systems, and clinics. The organization’s nearly 50,000 members include pharmacists, student pharmacists, and pharmacy technicians. For more than 75 years, ASHP has been at the forefront of efforts to improve medication use and enhance patient safety.

Addressing rising drug prices remains a top priority for ASHP, and we applaud HHS for taking concrete steps on this issue. ASHP engages regularly with state and federal policymakers to push for pricing reforms that protect and benefit patients. In addition to our individual efforts, ASHP is also a lead member of the Steering Committee of the Campaign for Sustainable Rx Pricing (CSRxP), a coalition consisting of physicians, consumers, payers, hospitals, health systems, and patient advocacy groups.

ASHP believes that meaningful reductions to drug pricing require, at minimum, demonstrable reductions in patient out-of-pocket (OOP) spending and/or systemic expenditures. After reviewing the proposed rule as well as the accompanying Centers for Medicare & Medicaid Services (CMS) actuarial report and the Milliman and Wakely reports, we believe that it is unlikely that the removal of the rebate safe harbor will accomplish these baseline goals. Thus, we cannot support the removal of the rebate safe harbor as currently written. ASHP would, however, support establishing a safe harbor for rebates applied at the point of sale (POS) if certain conditions are met, as a POS safe harbor would likely reduce patient costs. Below we detail our concerns regarding the rebate safe harbor and offer suggestions to improve the policy sufficiently to allow us to support it.

I. Removal of Rebate Safe Harbor

  • Reduced Out-of-Pocket Costs/Systemic Costs: As noted above, ASHP believes that a drug pricing solution will reduce patient OOP costs as well as overall federal healthcare spending. The analyses commissioned by CMS cannot comfortably support the conclusion that costs for patients or the system will decrease. CMS’s own actuarial analysis states that the proposed rule will likely increase OOP costs for Medicare beneficiaries on average and add to costs for the system as a whole, with the potential for a 20% increase in premiums. Taken together, the three analyses commissioned by HHS (i.e., CMS Actuary, Milliman, and Wakely) present potential impacts along a huge spectrum — ranging between $78.9 billion in decreased costs to $196 billion in increased costs over 10 years. This unacceptable uncertainty stems largely from the proposed rule’s sole focus on rebates rather than on addressing rebates and drug list prices in tandem.

    Were HHS to revise the rule to provide greater certainty about its impact on decreasing OOP, ASHP could potentially support it. We recognize that CMS has limited ability to require drug list price changes absent additional statutory authority. However, for the proposed rule to reduce OOP costs, drug companies will need to reduce drug list prices commensurate with or close to current rebate amounts. Nothing in the proposed rule requires such an action, and drug manufacturers have refused to make a firm commitment to do so. Thus, the proposed rule requires patients to take the reduction of list prices as an article of faith even though a failure to reduce list prices significantly will render the removal of the safe harbor meaningless. Therefore, we urge HHS to use its authority to address both PBM rebates and drug list prices concurrently to ensure that the removal of the rebate safe harbor generates patient and system savings.
  • Transparency: HHS notes in the proposed rule that determining the impact of the rule is difficult due to a lack of transparency in the system, including the treatment of rebates as proprietary information. HHS notes that “in some or many instances, plan sponsors under Medicare Part D and Medicaid [managed care organizations] have limited information about the percentage of rebates passed on to them and the percentage retained by their PBMs.” ASHP respects the need to protect trade secrets, but we also believe the system can benefit from transparency related to costs. Thus, we suggest HHS explore options for bringing greater transparency to the PBM rebates system. Specifically, rebates on drugs should be disclosed to participants in the system, including plan sponsors. We urge CMS to introduce PBM transparency requirements, either under the auspices of this proposed rule or through a separate rulemaking.

II. Imposition of Point-of-Sale Rebate Safe Harbor

ASHP believes the proposed POS safe harbor is consistent with ASHP’s push for transparency and reduced patient OOP. However, the proposed rule includes scant detail regarding implementation of the POS safe harbor. Before we can support it fully, we request that CMS clarify certain elements. At a minimum this safe harbor should be instituted in a manner designed to simplify reimbursement and promote transparency for both patients and pharmacies. This means that total pharmacy reimbursement, including any direct or indirect remuneration (DIR), would be reflected at the POS. Further, the negotiated rate between the PBM and the plan or manufacturer should not adversely impact a pharmacy’s ability to cover its costs — the POS reimbursement should, in all cases, be sufficient to cover a pharmacy’s acquisition cost for the drug.

III. Conclusion

ASHP appreciates this opportunity to offer our input on the proposed rule. As noted above, ASHP shares HHS’s commitment to reducing drug prices, and we are very willing to work with the agency to help identify and implement meaningful solutions. If you have any questions or wish to discuss our comments further, please contact me via email at [email protected] or by phone at (301)-664-8698.


Jillanne Schulte Wall, J.D.
Director, Federal Regulatory Affairs