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Another Voice: Administration caved to lobbyists on prescription reform

By Ron Klink

The Trump administration just sold out seniors to appease the health insurance lobby.

Earlier this year, the administration proposed a major health care reform that garnered applause across the political spectrum, even from lifelong Democrats like me. The overhaul would have forced insurance companies and pharmacy benefit managers to reduce Medicare beneficiaries' out-of-pocket pharmacy bills by tens of billions of dollars.

But in mid-July, officials at the Department of Health and Human Services scrapped that proposal due to intense opposition from insurance lobbyists. Patients won't forget this betrayal – nor should they.

The proposed rule would have helped 44 million Americans who rely on Medicare's "Part D" prescription drug benefit. Part D differs considerably from traditional Medicare. The government doesn't provide coverage directly. Instead, private insurers sponsor and sell plans to seniors and folks with disabilities. The government regulates and subsidizes those plans to ensure they're broadly affordable.

Most insurance companies use in-house or third-party PBMs to administer their drug plans. PBMs ultimately decide which drugs are available under each plan – and use that power to negotiate with pharmaceutical companies for steep discounts. Last year, drug firms offered about $166 billion in total rebates and discounts.

But patients don't necessarily share in these savings, at least not directly. That's because PBMs keep the discounts, which can reduce a drug's nominal "list" price by up to 70%, secret.

As a result, at the pharmacy counter, patients fork over their copays and coinsurance – a set percentage of a drug's cost – based on the full list price. For example, a medication could feature a list price of $100, but a PBM might negotiate a rebate that brings the true cost down to $50.

Since that massive discount is secret, a Part D plan with a 25% coinsurance requirement would force beneficiaries to pay $25 out of pocket. If beneficiaries could instead pay coinsurance based on the actual, postrebate cost of the drug, they'd only spend $12.50.

The administration's proposed rule would have effectively forced insurers and PBMs to pass discounts to beneficiaries through reduced copays and coinsurance. If 90% of discounts were passed on, Part D Medicare beneficiaries would have saved $53 billion over the next decade, according to one government analysis.

By reducing copays and coinsurance, the rebate rule would have made it much easier for Medicare enrollees to fill their prescriptions and remain healthy. By improving medication adherence, the rule could have reduced total health care spending on diabetes patients alone by $20 billion over the next decade.

As a dyed-in-the-wool Democrat, I rarely agree with the Trump administration. But this reform could have genuinely helped millions of Americans afford their prescriptions. It's a shame the administration buckled under the insurers and PMBs’ lobbying blitz.

Ron Klink is a former Democratic congressman from Pennsylvania and is currently senior policy adviser at Nelson Mullins Riley & Scarborough LLP.

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