The rise in federal costs comes from higherinsurance premiums, which otherwise would have been reduced by therebates. (Photo: Shutterstock)

A key part of the Trump administration's plan to lower the listprices of drugs wouldn't actually do so and would end up increasingfederal spending by tens of billions of dollars over a decade, theCongressional Budget Office said Thursday.

A proposal put forth by the U.S. Department of Health and HumanServices in January would sharply curtail a complex system ofdrug-price rebates that pharmaceuticalcompanies pay to pharmacy-benefit managers, or PBMs. The rebatesgive drugmakers' products favorable placement on list of drugscovered by health-insurance plans. Those lists can steer patientsto one product over another, using co-pays or cost sharing to makepreferred products cheaper.

Banning them would not have the intended effect of forcingprices down, the CBO said.

Related: Winners and losers in Trump's plan to kill drugrebates

“Rather than lowering list prices, manufacturers would offer therenegotiated discounts” in another form, said the CBO, whichperforms budgetary and economic analysis for Congress.

The proposal would increase spending for Medicare, the U.S.health program for the elderly and disabled, by about $170 billionover 10 years. It would raise federal spending for Medicaid, theshared state-federal health program for low-income people, by about$7 billion in the same period, according to the CBO.

The Pharmaceutical Care Management Association, which representsPBMs, said the report supports what the industry has been sayingall along.

“The CBO analysis confirms that the proposed rule onprescription drug rebates will not achieve the administration'sstated goal of reducing prescription drug prices,” PCMA ChiefExecutive Officer JC Scott said in a statement.

The estimate is a blow to the Trump administration'sdrug-cost-reduction efforts, a goal shared by both Republicans andDemocrats. Pharmacy benefit managers including those run by CignaCorp., UnitedHealth Group Inc. and CVS Health Corp., have opposedthe idea.

While rebates can be used to lower insurance premiums broadly,they have also resulted in high list prices that some patients paywhen they're outside of their insurance coverage or if they don'thave insurance. In January, HHS Secretary Alex Azar said thateliminating the rebates would “finally ease the burden of thesticker shock that millions of Americans experience every month forthe drugs they need.”

The rise in federal costs comes from higher insurance premiums,which otherwise would have been reduced by the rebates. Theproposal would also lower out-of-pocket drug costs for someMedicare beneficiaries, according to the CBO, leading to higherdrug utilization.

Read more: 

• Express Scripts' new formulary: A viablealternative to rebates or smoke and mirrors?
• Pfizer CEO predicts an end to drugrebates
• Study: Drug price hikes & rebates notcorrelated

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