US government may cease prescription rebates

Pfizer’s CEO believes the US government will eliminate rebates on prescription drugs.

As the company’s second quarter results were announced, chief executive Ian Read said one of the largest changes, which he thought would be positive for the industry, was the intention to “remove the safe harbour for discounts so as to eliminate rebates”.

Ian Read

He explained that approximately 40% of pharmaceutical prices are subsidies to the rest of the healthcare system, adding that this is not a sustainable position, and so removal of the rebates “will be very beneficial to patients and our industry, especially those companies who are launching new products over the next five years or so.”

He further explained that removal of rebates would remove what is known as the rebate trap, “whereby access is denied to innovative products because of a strong position of another product with its rebates.

“One example would be the Xeljanz slow penetration, but steady into its market given the situation of rebates of bigger competitors. I think the President is focused on improving through trade agreement the free-riding research. He wants to promote value-driven healthcare by linking payments to performance.”

President Trump has criticised Pfizer for raising prices and after Read spoke to him last month, the company decided not to proceed with price hikes on some of its drugs, saying it would not raise prices again this year. With Trump reportedly accusing the industry as a whole of “getting away with murder” when it comes to price hikes.

As for the timeline, when questioned, Read called the reform of systems “unpredictable”. He suggests that the government will focus first on the public sector but that this will quickly extend to commercial business for consistency, surmising “Transparency won’t allow that. So, I would see the rebates going away.”

Speaking in May, Scott Gottlieb, commissioner of food and drugs at the US Food and Drug Administration, said drug prices were too high and that this was due to the system of rebates between payers and manufacturers.

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