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CVS, Cigna fall after Trump administration proposes rule to lower drug prices

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Health and Human Services Secretary Alex Azar listens as U.S. President Donald Trump delivers a speech about lowering prescription drug prices from the Rose Garden at the White House in Washington, U.S., May 11, 2018.

Jonathan Ernst | Reuters

Health and Human Services Secretary Alex Azar listens as U.S. President Donald Trump delivers a speech about lowering prescription drug prices from the Rose Garden at the White House in Washington, U.S., May 11, 2018.

The Trump administration announced Thursday it plans to target “backdoor rebates” as it seeks to lower drug costs for consumers.

The Department of Health and Human Services said the proposal would address a “perverse incentive” related to rebates on prescription drugs paid by manufacturers and explicitly exclude those from the safe harbor definition of a “discount.” Instead, the department said the proposal would create a new safe harbor for discounts made available to patients at the pharmacy counter.

HHS Secretary Alex Azar said in a statement that the goal would be to create a system that prioritizes savings for patients.

“Every day, Americans—particularly our seniors—pay more than they need to for their prescription drugs because of a hidden system of kickbacks to middlemen,” Azar said. “President Trump is proposing to end this era of backdoor deals in the drug industry, bring real transparency to drug markets, and deliver savings directly to patients when they walk into the pharmacy.”

Shares of health stocks slipped in after-hours trade following the announcement. CVS Health and Cigna fell 3 percent, while Cardinal Health slipped 2 percent. Walgreens Boots Alliance and UnitedHealth also dipped about 1 percent.

A pharmacy benefit manager (PBM) lobbying group said while it is “encouraged” by proposals that increase competition, it is concerned that eliminating rebates for PBMs may increase costs. J.C. Scott, president and CEO of the Pharmaceutical Care Management Association, said in a statement that this may “force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries.”

Industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) said it supports the proposal, saying it would “fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers (PBMs) favoring medicines with high list prices.”

— Imagala.com’s Bertha Coombs and Angelica Lavito contributed to this report.

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