Limiting drug rebates might be counter-productive

See Requiem for a Rebate Rule: The feds discover that meddling in drug prices creates more problems. WSJ editorial. Excerpts:

"The Administration rule tried to limit Medicare and Medicaid drug rebates, which are bulk discounts negotiated by brokers known as pharmacy-benefit managers. The rebates aren’t passed directly to consumers at the pharmacy counter, but they tend to be plowed back into plans to lower premiums for everyone.

Thus the worry in Congress and the Administration became that nixing rebates would mean premium increases for seniors in an election year. Ruh roh. This made the project politically unpalatable, even if it’s hard to predict how much premiums would rise.

Health and Human Services estimated the rule would have increased federal spending by about $200 billion over 10 years. The Administration then explored a “demonstration” project that would have handed taxpayer subsidies to insurers losing money from the rebate rule. A government planner’s job is never done.

In any event pharmacy-benefit managers are moving, albeit slowly, away from rebates and toward fees and other revenue sources, and government shouldn’t interrupt this progress. Pharmacy-benefit manager stocks rallied Thursday morning, which is a testament to how much regulatory uncertainty the potential rule was causing."

"net prices for drugs after rebates and discounts grew a mere 1.5% in 2018, which is lower than general inflation. Few people in the press report this, perhaps because it doesn’t fit today’s anti-business political mood."