HR Policy Voices Concern Over Removal of Safe Harbor Protection for Prescription Drug Rebates

April 26, 2019

In a letter to HHS Secretary Alex Azar, HR Policy Association highlights the negative impact that a rule removing the safe harbor protection for prescription drug rebates could have on employer-sponsored health care benefits.
Top concerns: There may not be a long enough implementation period for employers and the health care supply chain to adjust to the rule.  The rule may also negatively impact the coverage for Americans in group retiree coverage, including those who enroll in coverage through an employer group waiver plan (EGWP).  
Result could be higher premiums or dropped coverage for retirees: If the final rule requires point-of-sale rebates for employer-sponsored plans, including EGWPs, then beginning next year, employers will have to either significantly increase premiums or discontinue the EGWP offering due to the increased cost burden.  This would force retirees to go without coverage or into the individual market, where they would experience higher plan costs without guarantee of lower drug costs. 
To mitigate these unintended consequences, the Association recommends: 
  • HHS preserve the current rebate flexibility for employer plans, allow plan sponsors to determine how to structure their retiree plans, and not impose a one-size-fits-all approach on where and to whom rebates are issued; 
  • The Centers for Medicare & Medicaid Services (CMS) consider ways to include EGWPs in the proposed demonstration if the rule is finalized for 2020, or, CMS could consider changing the calculation of the direct subsidy for EGWPs so the 2020 direct subsidy rises to the level it would have been had the final rule been implemented prior to latest bid deadline; and 
  • Implementation of the final rule should be delayed until January 1, 2021, to give stakeholders time to make all necessary adjustments and accommodations to the new regulation.