Publication

In searching for ways to satisfy public demand for lower drug prices, President Trump has found rare common ground with Democrats. The White House recently released a plan to reform the way pharmacy benefit managers (PBMs) negotiate prices with drugmakers on behalf of health insurance companies. Specifically, the proposal takes aim at special discounts or rebates negotiated by PBMs that create a perverse incentive for drugmakers to push up the list price of their products.

The idea is to get rid of these incentives in order to bring down drug prices, which would mean lower out-of-pocket expenses for patients. Democrats like Senator Ron Wyden have long pushed for changes to the rebate structure. However, Trump’s plan has drawn fire from critics who say it could become a boon for big drug companies by shifting more costs to the federal government. The truth is, the rebate proposal is a good first step to help Medicare beneficiaries at the drug counter; but, without further action to increase transparency around drug pricing and encourage competition, costs could be shifted from drug companies to taxpayers.