Delay on Rule That Would Eliminate Medicare Part D Drug Rebates


Capital Building

On January 29, 2021, the Biden Administration delayed implementation of a recently adopted rule that would largely eliminate drug rebates in Medicare Part D. This rule had not yet been implemented and was scheduled to go into effect in 2022. This delay is part of the Biden Administration’s broader freeze on all regulations recently adopted by the prior administration pending their review, as often happens between administrations.

What does the rule do? Quite simply, the rule removes special legal protection (called a safe-harbor) for drug rebates that are not passed directly to the enrollee. With this protection gone, most drug rebates in Medicare Part D plans would not be allowed unless they are passed through to Medicare beneficiaries.

So, what would this rule mean for the T1D community? As insulin is one of the drugs most heavily rebated, in some cases insulin is rebated up to 70%, the savings for Medicare enrollees with T1D could be significant as out-of-pocket costs for enrollees would now be based on net price instead of list price. However, the rule notes a specific estimate of savings is difficult to discern as it is unclear how plans, pharmacy benefit managers (PBMs), and manufacturers will respond.

You may remember that beginning this year, people with diabetes in Medicare were able to choose Part D plans that offer insulin at $35 per month, but not all plans or insulins are included. This rule, when implemented, would likely expand cost savings to more insulins and more plans.

The path we took to this point was a long one. The rule eliminating drug rebates in Medicare Part D was first proposed in early 2019, and supported by JDRF, but withdrawn when a study projected that the rule would increase Federal spending. However, the rule was revived and finalized by HHS at the end of 2020 citing the Agency’s belief that savings to seniors would outstrip any potential increase in Medicare premiums.

Separate from the Biden Administration’s action on the rebate rule, on January 30, a Federal court ordered a delay of the effective date until January 1, 2023. The Pharmaceutical Care Management Association, the PBM trade association, sued to stop implementation of the rule and the court granted a temporary injunction at their request. The PBMs claim the timeline does not afford PBMs and health plans the time they need to negotiate contracts and meet existing Medicare Advantage deadlines. The rule was originally scheduled to go into effect January 1, 2022.

As noted in our statement, JDRF urges the Biden Administration to act expeditiously in their review to enable this step to address the issue of affordable insulin to move forward.

We know that in order to solve the problem of high insulin costs, we need long-term solutions that make this lifesaving drug affordable for all, whether someone has Medicare, another kind of insurance, or no insurance at all.  JDRF will continue to work closely with the new Administration and new Congress to ensure comprehensive, long-term solutions allowing everyone who needs it to obtain insulin at a low and predictable cost.