Home > posts > CFIF to U.S. Senate: On Drug Prices, Say “NO” to Mandatory Inflation Rebate Proposals
July 15th, 2019 2:22 pm
CFIF to U.S. Senate: On Drug Prices, Say “NO” to Mandatory Inflation Rebate Proposals
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On behalf of over 300,000 of our supporters and activists across the nation, CFIF has written the following letter opposing any use of Mandatory Inflation Rebate Proposals when it comes to the issue of addressing drug prices:

We believe that market-oriented solutions offer the optimal solution, and resolutely oppose any use of mandatory inflation rebate proposals – which would unfairly penalize a drug’s manufacturer with higher taxes whenever that drug’s price rises faster than inflation – that will make matters worse, not better. Among other defects, such a government-imposed penalty would undermine Medicare Part D’s current structure, which uses market-based competition to mitigate drug costs. Part D currently works via privately-negotiated rebates, meaning that no specific price reliably represents a drug’s underlying price. Accordingly, the proposal would inherently undermine privately-negotiated Part D plan rebates, which the Congressional Budget Office (CBO) has said “appear to make the net prices approach the lowest prices obtained in the private sector.” Indeed, as the Altarum Institute has highlighted, those Part D plans currently achieve greater brand medicine rebates than private insurers.

Additionally, inflation rebate proposals would violate non-interference clauses that facilitate competition among Part D plans, which provide a critical part of Part D’s success in mitigating costs since its inception. They would also arbitrarily apply to new pharmaceuticals while bypassing generic brands, which now constitute approximately 90% of Part D prescriptions. The proposal would also inescapably weaken incentives on the part of Part D plan sponsors to negotiate with drug manufacturers and minimize drug spending under a regime of statutorily-imposed rebates, thereby setting a negative precedent for those sponsors. It also bears emphasis that private-sector limits on drug cost increases already exist via “price protection rebates” that Pharmacy Benefit Managers (PBMs) negotiate with manufacturers.”

The issue of reducing drug prices remains an important one, but it’s just as important that we pursue policies that make the situation better, not those that would make the situation far worse.

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