Trump ad­min­is­tra­tion pro­pos­es new rules that strip away many of the re­bate deals be­tween phar­ma and PBMs, push­ing dis­counts to con­sumers

Af­ter threat­en­ing for the past 2 years to do some­thing dra­mat­ic to change the steady up­ward tra­jec­to­ry of list drug prices and slash out-of-pock­et costs, the Trump ad­min­is­tra­tion has just fired a broad­side straight in­to one of the key dri­vers that has stoked pub­lic anger against the bio­phar­ma in­dus­try.

Alex Azar

HHS Sec­re­tary Alex Azar is­sued a re­lease Thurs­day evening say­ing that the gov­ern­ment will change the safe har­bor pro­vi­sions that al­low drug com­pa­nies to pay re­bates to the phar­ma­cy ben­e­fit man­agers that man­age their ther­a­peu­tics. That sys­tem of re­bates has con­tin­ued to shove up list prices while the rev­enue from drug port­fo­lios has flat­tened or in­creased at on­ly a frac­tion of what we’ve seen in pre­vi­ous years.

In­stead, the Trump ad­min­is­tra­tion is propos­ing that the safe har­bor pro­vi­sion will al­low drug com­pa­nies to hand dis­counts di­rect to con­sumers, so they get the di­rect ben­e­fit of the dis­counts that drug com­pa­nies had been pass­ing along to the PBMs like Ex­press Scripts. In place of the re­bates PBMs would earn a fixed price fee.

That should par­tic­u­lar­ly ad­van­tage se­niors on Medicare, said Azar. In fact, the an­ti-kick­back rules are aimed di­rect­ly at the pub­licly fund­ed health plans in the US, but the rules would like­ly spread in­to the pri­vate in­sur­ance mar­ket giv­en the mar­ket heft of Medicare and the Med­ic­aid plans that would be af­fect­ed. Al­so, if every­one knows what mem­bers of Medicare and Med­ic­aid are be­ing charged, then the whole opaque process around re­tail drug prices that’s ex­ist­ed for decades could pre­sum­ably be elim­i­nat­ed or ex­posed.

The dev­il, as al­ways in Wash­ing­ton DC, will be in the de­tails. Here’s the full de­scrip­tion of what the ad­min­is­tra­tion is propos­ing.

Re­bates have long been a thorn in the side of in­dus­try crit­ics, and in­creas­ing­ly the phar­ma com­pa­nies them­selves. These se­cret deals be­tween drug mak­ers and PBMs — which the gov­ern­ment says amount to 30% of drugs’ list price — are used to arrange fa­vor­able po­si­tions on the for­mu­la­ries used to steer mem­bers to par­tic­u­lar drugs. They al­so dic­tate the co-pays that are charged to mil­lions of mem­bers.

For the phar­ma in­dus­try, which has been the tar­get of grow­ing pub­lic anger, the move will be wel­comed as the at­ten­tion shifts to PBMs.

Stephen Ubl, PhRMA CEO

“We ap­plaud the Ad­min­is­tra­tion for tak­ing steps to re­form the re­bate sys­tem to low­er pa­tients’ out-of-pock­et costs,” not­ed PhRMA chief Stephen Ubl. “Our cur­rent health care sys­tem re­sults in pa­tients of­ten pay­ing cost-shar­ing based on the list price, re­gard­less of the dis­count their in­sur­er re­ceives. We need to en­sure that the $150 bil­lion in ne­go­ti­at­ed re­bates and dis­counts are used to low­er costs for pa­tients at the phar­ma­cy.”

“This pro­pos­al would al­so fix the mis­aligned in­cen­tives in the sys­tem that cur­rent­ly re­sult in in­sur­ers and phar­ma­cy ben­e­fit man­agers (PBMs) fa­vor­ing med­i­cines with high list prices.”

“This his­toric ac­tion, com­bined with oth­er ad­min­is­tra­tive and leg­isla­tive ef­forts on pre­scrip­tion drug pric­ing, is a ma­jor de­par­ture from a bro­ken sta­tus quo that serves spe­cial in­ter­ests and moves to­ward a new sys­tem that puts Amer­i­can pa­tients first,” Azar said in a state­ment. “De­moc­rats and Re­pub­li­cans look­ing to low­er pre­scrip­tion drug costs have crit­i­cized this opaque sys­tem for years, and they could pass our pro­pos­al in­to law im­me­di­ate­ly.”

Next up: Will both par­ties be able to set aside their dra­mat­ic dif­fer­ences and reach a bi­par­ti­san deal? How­ev­er this plays out, to­day’s pro­pos­al now takes cen­ter ring in the de­bate over drug prices.

There’s a lot more dis­cus­sion to come.

Im­age: Pres­i­dent Trump. Shut­ter­stock

As Nas­daq en­rolls the fi­nal batch of 2019 IPOs, how have the num­bers com­pared to past years?

IGM Biosciences’ upsized IPO haul, coming after SpringWorks’ sizable public debut, has revved up some momentum for the last rush of biotech IPOs in 2019.

With 39 new listings on the books and roughly two more months to go before winding down, Nasdaq’s head of healthcare listings Jordan Saxe sees the exchange marking 50 to 60 biopharma IPOs for the year.

“December 15 is usually the last possible day that companies will price,” he said, as companies get ready for business talks at the annual JP Morgan Healthcare Conference in January.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,900+ biopharma pros reading Endpoints daily — and it's free.

A fa­vorite in Alex­ion’s C-suite is leav­ing, and some mighty sur­prised an­a­lysts aren’t the least bit hap­py about it

Analysts hate to lose a biotech CFO they’ve come to trust and admire — especially if they’re being blindsided by a surprise exit.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,900+ biopharma pros reading Endpoints daily — and it's free.

David Grainger [file photo]

'Dis­con­nect the bas­tard­s' — one biotech's plan to break can­cer cell­s' uni­fied de­fens­es

Chemotherapy and radiotherapy are the current gladiators of cancer treatment, but they come with well-known limitations and side-effects. The emergence of immunotherapy — a ferocious new titan in oncologist’s toolbox — takes the brakes off the immune system to kill cancer cells with remarkable success in some cases, but the approach is not always effective. What makes certain forms of cancer so resilient? Scientists may have finally pieced together a tantalizing piece of the puzzle, and a new biotech is banking on a new approach to fill the gap.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,900+ biopharma pros reading Endpoints daily — and it's free.

While No­var­tis ban­ish­es Zol­gens­ma scan­dal scars — Bio­gen goes on a Spin­raza 'of­fen­sive'

While Novartis painstakingly works to mop up the stench of the data manipulation scandal associated with its expensive gene therapy for spinal muscular atrophy (SMA) Zolgensma— rival Biogen is attempting to expand the use of its SMA therapy, Spinraza. 

The US drugmaker $BIIB secured US approval for Spinraza for use in the often fatal genetic disease in 2016. The approval covered a broad range of patients with infantile-onset (most likely to develop Type 1) SMA. 

Jason Kelly. Mike Blake/Reuters via Adobe

Eye­ing big ther­a­peu­tic push, Gink­go bags $290M to build a cell pro­gram­ming em­pire

Ginkgo Bioworks is on a roll. Days after publicizing a plan to nurture new startups via partnerships with accelerators Y Combinator and Petri, the Boston biotech says it has raised another $290 million for its cell programming platform to reach further and wider.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,900+ biopharma pros reading Endpoints daily — and it's free.

UP­DAT­ED: Speak­er Nan­cy Pelosi to un­veil bill for fed­er­al­ly ne­go­ti­at­ed drug prices

After months of buzz from both sides of the aisle, Speaker Nancy Pelosi will today introduce her plan to allow the federal government to negotiate prices for 250 prescription drugs, setting up a showdown with a pharmaceutical industry working overtime to prevent it.

The need to limit drug prices is a rare point of agreement between President Trump and Democrats, although the president has yet to comment on the proposal and will likely face pressure to back a more conservative option or no bill at all. Republican Senator Chuck Grassley is reportedly lobbying his fellow party members on a more modest proposal he negotiated with Democratic Senator Ron Wyden in July.

Jeff Kindler's Cen­trex­ion re­news bid to make pub­lic de­but

Jeffrey Kindler’s plan to take his biotech — which is developing a slate of non-opioid painkillers — public, is back on.

The Boston based company, led by former Pfizer $PFE chief Kindler, originally contemplated a $70 million to $80 million IPO last year— but eventually postponed that strategy. On Wednesday, the company revived its bid to make a public debut in a filing with the SEC — although no pricing details were disclosed.

Zachary Hornby. Boundless

'A fourth rev­o­lu­tion in can­cer ther­a­pies': ARCH-backed Bound­less Bio flash­es big check, makes big­ger promis­es in de­but

It was the cellular equivalent of opening your car door and finding an active, roaring engine in the driver seat.

Scientists learned strands of DNA could occasionally appear outside of its traditional home in the nucleus in the 1970s, when they appeared as little, innocuous circles on microscopes; inexplicable but apparently innate. But not until UC San Diego’s Paul Mischel published his first study in Science in 2014 did researchers realize these circles were not only active but potentially overactive and driving some cancer tumors’ superhuman growth.

Scott Gottlieb, AP Images

Scott Got­tlieb is once again join­ing a team that en­joyed good times at the FDA un­der his high-en­er­gy stint at the helm

Right after jumping on Michael Milken’s FasterCures board on Monday, the newly departed FDA commissioner is back today with news about another life sciences board post that gives him a ringside chair to cheer on a lead player in the real-world evidence movement — one with very close ties to the FDA.

Aetion is reporting this morning that Gottlieb is joining their board, a group that includes Mohamad Makhzoumi, a general partner at New Enterprise Associates, where Gottlieb returned after stepping out of his role at the FDA 2 years after he started.

Gottlieb — one of the best connected execs in biopharma — knows this company well. As head of FDA he championed the use of real-world evidence to help guide drug developers and the agency in gaining greater efficiencies, which helped set up Aetion as a high-profile player in the game.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,900+ biopharma pros reading Endpoints daily — and it's free.