FDA chief suggests kickback law could be used to rein in drug prices

Drug rebates paid between pharmaceutical companies and pharmacy benefit managers enjoy safe harbor status under federal kickback law, leaving them immune from legal scrutiny. But that could change, FDA chief Dr. Scott Gottlieb suggested yesterday at the FDA Law Institute’s annual meeting.

The commissioner reportedly hinted that reinterpreting the law could help lower drug prices.

“One of the dynamics I’ve talked about before that’s driving higher and higher list prices, is the system of rebates between payers and manufacturers,” Gottlieb said, according to his prepared remarks. “And so what if we took on this system directly, by having the federal government reexamine the current safe harbor for drug rebates under the Anti-Kickback Statute?”

Rebates are traditionally paid by pharmaceutical companies to third-party players like pharmacy benefit managers. Their purpose is to ensure that a product is favorably or exclusively placed on an insurer’s formulary. Critics argue that rebates essentially act as kickbacks, while insurers counter that rebates help them to keep premiums down by spreading the savings.

Without rebates, according to a statement from the Pharmaceutical Care Management Association (an organization that represents PBMs), patients and payers would be “at the mercy of drug manufacturer pricing strategies.”

The president is scheduled to give a speech about drug pricing next week, but it’s not clear what strategies he will back. Gottlieb has made his stance clear: the administration, with the FDA’s help, must address loopholes in the law that brand-name companies exploit to keep generic competition off the market.

Testifying before the House appropriations subcommittee last year, Gottlieb argued that helping generics gain access to the market could bring down the prices for expensive brand name pharmaceuticals.

“Simply put, too many patients are priced out of the medicines they need,” Gottlieb said. “While the FDA does not have a direct role in drug pricing, we can take steps to facilitate entry of lower-cost alternatives to the market, and increase competition.”

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