Last week the Department of Health and Human Services proposed a rule to end the industry-wide system of after-market discounts called rebates that pharmacy benefit managers (PBMs) receive from drugmakers, a practice that has been under increased scrutiny.
If finalized, the rule would change a system that has been in place for decades and that has been criticized for obfuscating the real price of prescription medicines.
Now CEOs from Novartis and Eli Lilly have backed US government proposals to cut out “middlemen” in the health system, who have inflated the costs of their medicines. Novartis’ Vas Narasimhan, and Eli Lilly’s David Ricks backed the proposals to end rebates paid to pharmacy benefit managers and health insurers that push up the prices of their diabetes medicines.
While the justification for the rebates is that they pay for improvements elsewhere in the US healthcare system, big pharma companies argue they don’t benefit as they have to push up prices to maintain profit margins. Critics also say that patients do not benefit either, as in the US they may have to cover part or all of their medicine costs, depending on their health insurance arrangements.
The administration of president Donald Trump in January proposed a rule that would end the rebate system, or pass savings to patients.
In an interview with Reuters, Novartis said it pays almost 50% of gross revenues in the US into rebates. The Novartis CEO added: “If you return those rebates to patients, so patients pay less out of pocket, I think that is something that makes a lot of sense and will correct a distortion in the marketplace.”
But he also said efforts to link US prices to those in other countries are “destructive”, adding that in some cases US prices are cheaper.
“There are situations where prices in the US are certainly higher than the prices in Europe, but there are many situations, as well, where they are very comparable,” he said. “It’s difficult to make blanket statements, like this is always happening.”
Eli Lilly’s chief executive David Ricks, in a quarterly conference call with analysts, said the proposals are a “win for patients, lowering their out-of-pocket costs at the pharmacy with the greatest benefit realized by patients taking more highly-rebated products such as insulin.”
Rival diabetes drug manufacturers Sanofi and Novo Nordisk have also backed the proposals to cut rebates.