Trump admin rebate rule to cost $177B, Congressional Budget Office says

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A proposal from the Trump administration to eliminate the use of drug rebates in Medicare would cost the federal government $177 billion through 2029, according to a new report from the Congressional Budget Office.

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Under the rule, which is not yet final, spending in the Medicare program would rise by $170 billion, while spending in Medicaid would increase by $7 billion. The increase, the office said, would come from the entitlement program having to spend more on premiums after insurers increase the monthly cost on enrollees.

“Because the government subsidizes 74.5 percent of the basic beneficiary premium, higher premiums would lead to larger federal subsidies, thus increasing federal spending,” CBO wrote.

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The Department of Health and Human Services argued the rule would not “grossly increase premiums,” citing reports from independent actuaries.

“Other cost estimates commissioned by the government projects this rule SAVING nearly $100 billion over the same period,” the agency said in a statement. “This is yet another attempt at estimating complex behavior changes to a broken system that yields a lower number than the CMS actuary.”

Opponents of the effort, including pharmacy benefit managers (PBMs), say it would do nothing to actually lower drug costs. The rule would lead pharmaceutical companies to withhold 15 percent of the current rebates, CBO says, indicating that the industry would instead provide the discounts for prescriptions filled exclusively by Medicare Part D and Medicaid enrollees to drug distributors.

The Pharmaceutical Care Management Association, the PBM industry’s main lobbying group, touted the report from the federal scorekeeper as proof that the rule “will not achieve the administration’s stated goal of reducing prescription drug prices.”

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The Trump administration is offering insurers a two-year phase-in option for the proposal where the federal government would cover 95 percent of any additional costs incurred by the companies.