America’s Health Insurance Plans (AHIP) is fighting back against recent claims that drug rebates have been the primary driver of the rising cost of prescriptions, releasing their own report Friday about the impact of the discounts.
The report (PDF), prepared by the consulting firm Milliman, relied on publicly available data on Medicare Part D drug spending. The analysts tracked the growth of list prices and rebates among drugs covered by Medicare Part D, as well as the number of competitors for those drugs.
The study found that while rebates did indeed increase over the same period of time as the increase in list prices, the presence (or lack) of rebates had more to do with the level of competition surrounding the eligible drugs.
“Drugs without rebates are costing more than drugs with rebates, and we find that extremely concerning,” said Daniel Nam, executive director of federal programs for AHIP, in an interview with FierceHealthcare. “If you’re talking about rebates as a solution, or doing something to rebates as a solution for the drug pricing problem, you’re really only focusing on a small section. It’s really, at the end of the day more of a distraction from some of the solutions that might actually work.”
These findings strike against the notion that targeting rebates will bring drug pricing down.
“Some of the narrative being pushed by others is that ‘because rebates are causing high drug prices, if you get rid of rebates, drug prices will go down.’ And we think that is fallacious reasoning,” argued Tom Kornfield, vice president of Medicare policy at AHIP, in an interview. “It’s just not borne out by the data. And our study is really the first study to actually look at the rebate data and see how it relates to these drug price increases.”
On a certain level, it makes sense that rebates wouldn’t be the primary driver of high costs—after all, list prices have been rising every year since the 1970s, while rebates are a relatively recent phenomenon.
Still, drug rebates and the growing role played by pharmacy benefit managers have been a central component of the renewed debate around drug pricing. Occasionally derided as “kickbacks,” the rebates became an early target for the Trump administration.
In a recent draft rule, HHS proposed to change the safe harbor protections that currently protect drug rebates from antikickback lawsuits.
According to AHIP, this move is off-target. If, as its study indicates, rebates aren’t particularly related to rising drug prices, removing their protections appears to be a misdirected.
When asked for comment on the new research, HHS directed FierceHealthcare back to the justification delivered in the president’s blueprint to lower drug costs (PDF).
“Prices soared on certain advanced small molecule drugs and new specialty drugs. Meanwhile, PBMs exploited new utilization management tools and ‘price protection’ contracts to extract even higher rebates, further widening the gap between list and net prices,” the blueprint said.
Although AHIP’s report didn’t touch heavily on alternative drivers of prescription drug costs, it did repeat assertions that increased competition for drugs with monopolies over certain indications would bring prices down. Nam had a few ideas in particular about the more-recent spikes.
“When we’re looking at really niche-type therapies and as these are moving into gene therapy and CAR-T-type modified gene therapies, they’re becoming much more niche,” said Nam. “This narrow therapeutic sort of indication allows for drug companies to put out new products that aren’t competitors of each other. This sort of scenario you can see with Humira and Enbrel: They compete with each other to a certain extent but they have so many indications that they get to sort of own their little corners of the world. And I think that the open-ended question that I think no one has a great answer for is ‘well how do you infuse competition into these narrow therapeutic drugs and therapies?’”
AHIP also noted that while its study depended upon Medicare Part D data, which is publicly available, the Centers for Medicare and Medicaid Services (CMS) has even more data and is perfectly capable of reproducing AHIP’s research.
“This is something that CMS can do very easily because they don’t have just the sample, they have everything. So, our main point, and really our main audience here is CMS,” Nam said. “We’re asking them to make sure they do the right analyses and base their policy decisions on research and data.”
CMS could not be reached for comment.