A.1962.A/S.2393.B – Rx Rebates

This legislation, A.1962-A/S.2393-B, would require that at least 85 percent of drug rebates are passed through to consumers at the point of sale.  HPA opposes this legislation as it will do nothing to address the real reason for rising pharmaceutical costs – the high prices drug companies charge.  Further, the focus on rebates is a distraction.  The majority of brand-name drugs do not have rebates; only those that have one or more competitors within the drug’s class typically do.[1]

While not all health plans apply manufacturer rebates to reduce cost-sharing on each drug individually at the point of sale, savings from rebates are used to reduce premiums and out-of-pocket costs for New Yorkers.  Specifically, as part of the rate filing process, health plans currently provide extensive information to the Department of Financial Services, including information related to pharmaceutical spending and prescription drug rebates.  In establishing premiums, the reported rebates serve to reduce the overall projected claims costs resulting in lower premiums for all subscribers, making this legislation unnecessary.  By mandating that 85 percent of drug rebates are passed on to individuals at the point of sale, this legislation will severely limit the ability of plans to utilize rebates to lower the price of premiums for employers and consumers.  Further, the legislation may actually increase the cost of coverage for consumers and employers.

Rather than ensuring consumers get the benefit of rebates, this legislation operates to directly allow drug manufacturers to influence buying decisions at the point of sale, which is problematic.  It is not at all clear how the requirements would work with a typical prescription drug benefit that limits the members’ obligation to a copayment depending on whether the drug purchased is generic or brand or classified in a preferred or non-preferred tier.  Further, the bill includes language that would reduce or stifle transparency regarding the actual amount of rebates received on a product, manufacturer, or pharmacy-specific basis.  The bill also includes technical flaws, as it amends the Insurance Law inconsistently such that it does not appear to be applicable to either all markets or particular markets (i.e. individual, small group and large group) written by all types of insurers (i.e. for-profit insurers, not-for-profit corporations, and health maintenance organizations).

Additionally, any restrictions on the use of manufacturer rebates could significantly impair the ability of health plans to develop and implement Value-Based Payment (VBP) designs related to prescription drugs.  This is because the primary mechanism for reconciling payment based on past performance for value is a rebate.  VBP arrangements inherently rely on evaluating a drug’s performance and adjusting payments and incentives according to whether or not measures on quality, safety, or adherence have been met.  Restricting the use of rebates could undermine the development of innovative benefit designs that foster value over fee-for-service models.

Even after accounting for all discounts and rebates, the growth in spending on prescription drugs has contributed significantly to overall health care spending growth.  It is the exorbitant cost of prescription medications – set and controlled solely by drug makers – that creates a barrier for patients to receive the treatments they need.  This legislation will do nothing to make prescription drugs more affordable for consumers, and will lead to higher premiums for consumers and employers.

For all these reasons, we urge you to reject A.1962-A/S.2393-B.

[1] Prescription Drug Rebates and Part D Drug Costs. Milliman. July 16, 2018. Available at https://www.ahip.org/wp-content/uploads/2018/07/AHIP-Part-D-Rebates-20180716.pdf