HHS Mulls Changes to Safe Harbor for PBMs, FDA Considers Drug Importation

This week, the Trump administration made a pair of significant policy advancements related to its ongoing efforts to reduce the price of drugs for American patients.

This week, the Trump administration made a pair of significant policy advancements related to its ongoing efforts to reduce the price of drugs for American patients.

First, the Office of Information and Regulatory Affairs is considering a proposed rule form HHS titled “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.”

Current safe harbor protections shelter drug makers’ rebates made to pharmacy benefit managers (PBMs) from penalties under the federal anti-kickback statute, and HHS has been clear in its request for comments on the Trump administration’s blueprint to lower drug prices that it is seeking ways to reduce the impact of such rebates on the cost of drugs to patients. While the newly proposed rule, received on July 18, has not yet been made public, its title suggests that the Trump administration may be moving toward a system free of rebates.

Such an overhaul would be consistent with the vision that HHS Secretary Alex Azar proposed in his June 2018 testimony before the Senate’s Committee on Health, Education, Labor, and Pensions. In his testimony, Azar suggested that the United States move away from a system that allows for rebates and toward fixed-priced contracts or value-based contracts.

The Pharmaceutical Care Management Association (PCMA), a group that represents PBMs, was quick to respond to news of the proposed rule. Mark Merritt, CEO of PCMA, released a statement on July 19, claiming that removing safe harbor protections would not reduce drug prices because “neither PBMs nor rebates play any meaningful role” in negotiating costs for drugs covered under Medicare Part B, and that rebates have reduced costs under Medicare Part D. Merritt also questioned whether HHS has the authority to make changes to safe harbor through regulation.

In a second major policy move, the FDA announced on July 19 that it is forming a working group to develop options to temporarily import drugs from overseas in cases of limited availability.

When certain drugs are produced only by a single manufacturer—despite having no blocking patents or exclusivities—sudden price hikes or disruptions in the supply chain “…can create public health consequences that are similar to the occurrence of a drug shortage,” said FDA Commissioner Scott Gottlieb, MD, in a statement announcing the group’s formation. “We want to examine whether—under these narrow conditions—the additional market competition from the short-term importation of foreign versions of the drug may complement the FDA’s current efforts and help meet near-term patient need in the [United States] until new competition is able to enter the domestic market.”

The new working group will examine the statutory and regulatory requirements necessary to advance such a policy, as well as address how to define an “access dislocation” that would trigger a need for importation, among other issues.

Industry groups voiced criticism of the proposal; the Association for Accessible Medicines (AAM), which represents generic and biosimilar drug makers, said in a statement that, rather than investigating importation, policy makers “…should be to address why there are sole source off-patent drugs in the first place,” adding that “importation of prescription drugs manufactured overseas will not solve the underlying under-reimbursement issues” or “monopolies and price increases that are enabled by well-documented abuses of the patent system.”