The Trump administration on Thursday scrapped one of its most ambitious proposals for lowering prescription medicine prices, backing down from a policy aimed at health insurers and raising the possibility of new measures focused on drugmakers.
"Based on careful analysis and thorough consideration, the President has chose to withdraw the rebate rule", White House spokesman Judd Deere told Business Insider in a statement Thursday".
Pharmacy benefit managers (PBMs) negotiate a drug discount on behalf of health insurers and collect a commission for themselves as profit. The turnaround benefits the largest pharmacy-benefit managers, including Cigna Corp.'s Express Scripts, CVS Health Corp.'s Caremark and UnitedHealth Group Inc.'s OptumRx, which all surged on Thursday.
Meanwhile, pharmaceutical company shares fell for the day, with Merck Co off four percent, Bristol-Myers Squibb Co down three percent, and Pfizer Inc off two percent.
Overall prescription drug inflation seems to have stabilized, with more monthly declines than increases recently.
Rebates are a largely unseen part of the complex world of drug pricing.
However, the White House has withdrawn from the debate.
On a call Thursday afternoon with reporters, another senior administration official said there was concern the rule's expense might compromise negotiations with Congress over legislation to lower drug costs.
"It was not prudent to go forward with the rule right now", said the official, adding that it would be risky and could upset a legislative deal. The rebates aren't passed directly to consumers at the pharmacy counter, but they tend to be plowed back into plans to lower premiums for everyone.More news: Announcement scheduled for new British GP deal
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The middlemen win a round: "This is very bad news for the pharmaceutical industry, which blames middlemen for high drug prices and vocally supported the proposed rebate overhaul", said Axios's Caitlin Owens.
The proposals are all aimed at lowering the cost of prescription medicines in the USA, which are among the highest in the world and have risen well above inflation in recent years, and have become something of a flagship campaign for Trump.
The Wall Street Journal praised the Trump administration for dropping plans for a prescription drug rebate rule.
The Trump administration is still considering a proposed rule that aims to bring some United States drug prices in the Medicare programme in line with lower prices paid by other countries.
Secretary of Health and Human Services Alex Azar announced his agency is dropping a proposal meant to lower drug prices. Most European countries pay for citizens' healthcare and directly negotiate drug prices.
An analysis by the Congressional Budget Office found that the proposal would raise Medicare Part D premiums for seniors and cost the federal government $177 billion in higher premium subsidies between 2020 and 2029.
"The Trump Administration deserves credit for showing humility and restraint on the rebate rule, and more of it on drug prices would be welcome", the Journal said.
The Nasdaq Biotechnology Index, often viewed as a barometer of investor sentiment about drug prices, was down 1.2% in NY.
"Political momentum was building against the 2020 implementation of the CMS proposal to eliminate pharmaceutical rebates in government programs due to the perceived unintended windfall profits that might have accrued to pharmaceutical manufacturers", JP Morgan analyst Gary Taylor wrote in a research note.
A White House spokesperson said in a statement obtained by Politico the administration will "consider using any and all tools to ensure that prescription drug costs will continue to decline".