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Drug Pricing: White House Announces Withdrawal of Proposed Changes to Anti-Kickback Safe Harbors

On July 11, 2019, the Trump administration announced it would withdraw a proposed rule that would eliminate the Anti-Kickback Statute (AKS) safe harbor that protected rebates made from pharmaceutical manufacturers to pharmacy benefit managers (PBMs). Announced on January 31, 2019, the proposed rule would have eliminated certain drug rebates and encouraged direct point-of-sale discounts for federal health care program beneficiaries.  Specifically, the rule would have:

  1. Eliminated AKS safe harbor protection for rebates paid by drug manufacturers to PBMs, Medicare Part D plans and Medicaid managed care plans,

  2. Created a new safe harbor for drug discounts offered by drug manufacturers to patients at the point of sale, and

  3. Created a new safe harbor for PBM fixed fees charged to drug manufacturers for services provided by PBMs. 

The goal of these changes was to decrease incentives for drug manufacturers to raise list prices to cover costs of rebates made to PBMs for formulary placement, and ultimately, to decrease out-of-pocket costs for federal beneficiaries. We discussed the proposed rule in a February 1, 2019 Health Care Law Today post entitled, “HHS Proposes New Rules to Eliminate Drug Rebates and Encourage Direct Discounts for Federal Beneficiaries.”  

In stepping away from these anticipated changes, the Trump administration has demonstrated that it may focus on different avenues for lowering drug prices. In the July 11 White House statement, spokesman Judd Deere said that the administration “is encouraged by continuing bipartisan conversations about legislation,” and that the President “will consider using any and all tools” to tackle high drug prices.

As a result of the proposed rule’s withdrawal, the AKS safe harbor allowing rebates paid by drug manufacturers to PBMs remains in place. In addition, direct drug discounts to patients and PBM fees charged to drug manufacturers are not protected under AKS safe harbors. 

We will continue to monitor and report on developments related to current efforts to address drug pricing. 

Stephanie Schwartz, Summer Associate, also contributed to the creation of this article.

© 2023 Foley & Lardner LLPNational Law Review, Volume IX, Number 204

About this Author

Benjamin Daniels, Foley Lardner, healthcare lawyer
Special Counsel

Benjamin M. Daniels is a special counsel and business lawyer with Foley & Lardner LLP. He focuses his practice in the health care field, where he advises health care providers, investors, and lenders on transactional matters and regulatory compliance, including mergers and acquisitions, recapitalizations, buyouts, restructurings, joint ventures, and broad range of commercial transactions. He is a member of the firm's Health Care Industry Team.

Prior to Foley, Mr. Daniels was an assistant general counsel to Fresenius Medical Care North America. While at...

Alexandra Shalom Health Care Lawyer Foley Lardner

Alexandra (Allie) Shalom is an associate and health care business lawyer with Foley & Lardner LLP, and a member of the firm’s Health Care Practice Group.

Allie's practice focuses on counseling clients in the health care, pharmacy, and medical device industries with respect to a wide range of regulatory and compliance matters. Her experience includes advising clients on Medicare and Medicaid reimbursement; internal investigations; managed care and value based payment arrangements; self-disclosures; federal and state fraud and abuse compliance; and state licensure issues. She also...