Trump Admin to Slash Drug Prices by Ending Corporate ‘Backdoor Rebates’

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On Thursday, Alex Azar, the Health and Human Services Secretary, and Daniel Levinson, the Inspector General, proposed a new rule that would lower the cost of prescription drugs and reduce out-of-pocket expenses for patients. The change is designed to encourage drug manufacturers to pass discounts onto consumers and bring additional transparency to the market.

“Every day, Americans—particularly our seniors—pay more than they need to for their prescription drugs because of a hidden system of kickbacks to middlemen,” said Azar, according to a report by Street Insider.

“President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy.”

“This historic action, combined with other administrative and legislative efforts on prescription drug pricing, is a major departure from a broken status quo that serves special interests and moves toward a new system that puts American patients first,” Azar continued. “Democrats and Republicans looking to lower prescription drug costs have criticized this opaque system for years, and they could pass our proposal into law immediately.”

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need.”

Under the proposed rule, rebates for prescription drugs – which, on average, amount to 26 to 31 percent of a medication’s list price today – may be passed on to consumers, impacting what patients pay at the pharmacy counter. Seniors using Medicare Part D would be one of the groups most likely to benefit from the change.

The HHS proposal alters how rebates from manufacturers can be used, specifically by excluding the current rebate approach from safe harbor protection under the Anti-Kickback Statute, a move that would prevent some “middlemen,” like pharmacy benefit managers (PBMs), Medicaid managed care organizations, and Part D plans, from benefiting from the rebates. Additionally, it creates a new safe harbor for drug rebates offered directly to consumers and for fixed-fee service agreements between manufacturers and PMBs.

Drug manufacturers often cite rebate costs as the reason behind price increases. The new HHS rule, therefore, could result in lower prices and increased competition.