Secret Drug Price Rebates Will Go Away, Pfizer CEO Predicts

(Bloomberg) -- Drugmakers will likely get rid of secret discounts to middlemen that have become a focus of the U.S. drug-cost debate, Pfizer Inc. Chief Executive Officer Ian Read predicted Tuesday.

“We're going to go to a marketplace where we don't have rebates,” Read told analysts while discussing the company's second-quarter financial results.

Rebates are confidential discounts drugmakers use to compete for coveted spots on pharmacy benefit managers' lists of covered drugs, and the discounts can help lower overall costs. But patients typically don't get the rebates directly. That means that when there's a steep rebate on an expensive drug, a patient paying out-of-pocket or having to cover a percentage of the list price can end up with a large bill.

The Trump administration is weighing a proposal to overhaul regulations governing the rebates, which could limit their use and increase competition between drugmakers, while helping some patients.

Pharmacy benefit managers, middlemen who negotiate drug rebates on behalf of employers and health plans, could lose under the proposal. The federal anti-kickback statute allows “safe harbor” to protect the use of rebates.

Pfizer recently agreed to hold off raising prices for certain drugs after Trump criticized the company and said it should be “ashamed” of the move. After Read and Trump spoke earlier this month, Pfizer promised to put off the increases that took effect on July 1 in order to give Trump a chance to work on his blueprint to change health care, including the rebate system.

To contact the reporter on this story: Jared S. Hopkins in New York at jhopkins38@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett

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