Following the proposed rule modifying the rebate safe harbor,1 Precision For Value conducted a Rapid Pulse survey of 25 formulary access decision makers. Initial expectations were that the proposed rule would be implemented largely as written, and that it would likely expand into the commercial space within the next 2-5 years.2 Guidance issued by the CMS on April 5, 2019, appeared to be an acknowledgment of the challenges associated with implementation of the rule, and an effort to make it more palatable.3 Plans were directed to submit their bids per the usual process, and they were given the opportunity to participate in a voluntary demonstration project using the proposed rule’s guidelines, with the federal government assuming a majority of the risk should the plans experience losses. From a plan risk perspective, it appeared that participation in the “voluntary” project was almost mandatory.

Approximately one month later, on May 5, 2019, the CBO scored the proposed rule as potentially increasing federal costs by over $177 billion, and likely leading to higher beneficiary premiums.4 This announcement re-energized opposition to the proposed rule, and probably facilitated talks between the White House and congressional members of both parties.5 These discussions focused on the implementation of an out-of-pocket spending cap for beneficiaries in place of the proposed safe harbor modification. This was likely the first time where it appeared that the proposed rule was at risk of serious changes, or elimination. Less than two weeks later, talks were discontinued, and further announcements were made (through CMS press releases and interpretation of the White House spring regulatory calendar), which potentially pushed finalization of the proposed rule into November of 2019.6-9 This timing is supported by commentary from the CMS regarding the possibility for a midyear (2020) implementation of the rule. At this point, few ideas have been offered as to how a midyear implementation would be accomplished, either operationally or financially.

On July 11, the White House withdrew the proposal to modify the rebate safe harbor.10 Whether or not the voluntary program with reduced risk corridors will still be available remains to be determined.  At this point, attention shifts to focus on the Senate’s efforts to craft a bipartisan package of healthcare bills, including some addressing drug prices.11 Despite the withdrawal of the proposed rule, it would be wise to consider what was happening leading up to the proposal. Events such as launches of low WAC products (eg, Gilead authorized generics, Humulin authorized generic),12-13 formulary offerings designed to accommodate them (ESI National Preferred Flex Formulary),14 and Medicare formularies that anticipated the proposed rule (CVS Allure Formulary)15 have shown that the healthcare marketplace does seem to be moving towards more transparency in rebates, and efforts to share those rebates with consumers. As future planning and strategy is undertaken, those 2 points should be kept top of mind, especially given the continued efforts by the 2 parties to reign in drug pricing.


  1. US Department of Health and Human Services. Fraud and abuse: removal of safe harbor protection for rebates involving prescription pharmaceuticals and creation of new safe harbor protection for certain point-of-sale reductions in price on prescription pharmaceuticals and certain pharmacy benefit manager service fees [unpublished proposed rule 02/06/2019]. Federal Register. abuse-removal-of-safe-harbor-protection-for-rebates-involving-prescription-pharmaceuticals. Accessed February 4, 2019.
  2. Precision Value & Health. Safe Harbor Survey [proprietary survey]. Conducted March 2019.
  3. Centers for Medicare & Medicaid Services. Part D Plan Sponsors—Guidance Regarding Part D Bids. Accessed May 24, 2019.
  4. Congressional Budget Office. Incorporating the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO’s Budget Projections—Supplemental Material for Updated Budget Projections: 2019 to 2029. Accessed May 22, 2019.
  5. Sagonowsky E. Lawmakers weigh Part D out-of-pocket cap instead of rebate proposal: report. Accessed May 21, 2019.
  6. Wilkerson J. HHS won’t publish rebate rule before Part D bids due June 3. Accessed May 22, 2019.
  7. Cohrs R. Trump blowup with dem leadership could jeopardize Rx pricing deal. Accessed May 22, 2019.
  8. Cohrs R. Trump admin delays next steps for int’l pricing index, rebate rule. Accessed May 22, 2019.
  9. King R. Verma exploring outcome-based ideas to tackle high drug costs. Accessed May 22, 2019.
  10. Owens C. 1 big thing … scoop: White House kills the rebate rule. Accessed July 11, 2019.
  11. Cohrs R. Grassley: Senate was always in driver’s seat on drug pricing. Accessed May 22, 2019.
  12. A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV [press release]. Accessed May 31, 2019.
  13. Han DH. Authorized generic of Humalog soon to be available at reduced price. Posted March 4, 2019. Accessed May 31, 2019.
  14. Miller S. A novel formulary built for the evolution of drug pricing. Posted Nov 13, 2018. Accessed May 31, 2019.
  15. Levy S. SilverScript unveils options to lower out-of-pocket drug costs. Posted Oct 2, 2018. Accessed May 31, 2019.