Rebates Reconfigured: HHS Proposes to Reform the Rebate System


On Thursday, January 31st, the Department of Health and Human Services (HHS) and the HHS Office of the Inspector General (HHS-OIG) proposed a rule that would eliminate supply-side rebates paid to Pharmacy Benefit Managers (PBMs), Medicare Part D Plans, and Medicaid Managed Care Plans. HHS aims to achieve this by changing safe harbor protections under the Anti-kickback Statute (AKS). The proposed rule, if finalized, will eliminate the existing safe harbor protection for rebates paid to PBMs, Medicare Part D Plans, and Medicaid Managed Care Plans, and create a new safe harbor for rebates passed directly to consumers and fixed-fee service arrangements between pharmaceutical manufacturers and PBMs. HHS notes that these supply-side rebates often inflate the list price of medications by 26 to 30 percent, and this cost often gets passed onto consumers in the form of higher out-of-pocket costs. By changing the safe harbor rules, HHS wants to level the playing field by requiring manufacturers to compete for consumers instead of just competing for the highest rebates. You can read the proposed rule here:


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