Could a seemingly bipartisan drug pricing fix actually raise prices?
That’s what Kaiser Permanente is saying in a new letter shared exclusively with STAT. The policy in question would tweak the Medicaid rebate system, and KP suggests it could lead to “tens of millions of dollars in higher prices annually,” and that the new drug prices would be so high that they would cause higher insurance premiums and cost sharing.
KP is talking about a proposal to lift the current cap on the rebates drug makers pay to state Medicaid programs when they hike their prices more than inflation. The cap, which was created by Obamacare, has been lambasted by the Trump Administration as a giveaway to ‘Big Pharma.’
“Right now, our entire system — both industry practices and government rules — encourages higher and higher list prices. It’s time for drug prices to go down. One particular example is a deal that the Affordable Care Act contained for the pharmaceutical industry: Congress put a cap on the penalty that drug companies had been paying when they raised prices faster than inflation. Yes, you heard that right,” HHS Secretary Alex Azar said in May 2018 about the cap.
The idea of eliminating the cap has been endorsed by the Trump administration and the congressional Medicaid advisors’ group known as MACPAC. It is also included in the Senate Finance Committee’s drug pricing packages. But KP says the cap has actually helped them negotiate better prices, because once a drug hits the cap the company no longer has to worry about triggering other Medicaid pricing requirements.
“Following enactment of the AMP Cap, some manufacturers approached Kaiser Permanente offering significantly deeper discounts. Because their total rebate liability was now capped, the manufacturers no longer had to worry about the impact of offering deeper discounts on best price, which would otherwise have caused very significant increases in basic rebates paid to Medicaid on the drugs at issue,” KP explains.
Who knew health policy could be so complicated?
KP is talking about a proposal to lift the current cap on the rebates drug makers pay to state Medicaid programs when they hike their prices more than inflation. The cap, which was created by Obamacare, has been lambasted by the Trump Administration as a giveaway to ‘Big Pharma.’
“Right now, our entire system — both industry practices and government rules — encourages higher and higher list prices. It’s time for drug prices to go down. One particular example is a deal that the Affordable Care Act contained for the pharmaceutical industry: Congress put a cap on the penalty that drug companies had been paying when they raised prices faster than inflation. Yes, you heard that right,” HHS Secretary Alex Azar said in May 2018 about the cap.
The idea of eliminating the cap has been endorsed by the Trump administration and the congressional Medicaid advisors’ group known as MACPAC. It is also included in the Senate Finance Committee’s drug pricing packages. But KP says the cap has actually helped them negotiate better prices, because once a drug hits the cap the company no longer has to worry about triggering other Medicaid pricing requirements.
“Following enactment of the AMP Cap, some manufacturers approached Kaiser Permanente offering significantly deeper discounts. Because their total rebate liability was now capped, the manufacturers no longer had to worry about the impact of offering deeper discounts on best price, which would otherwise have caused very significant increases in basic rebates paid to Medicaid on the drugs at issue,” KP explains.
Who knew health policy could be so complicated?
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