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hello this is dr eric bricker and thank you for watching a healthcare z today's topic is farmer rebates to pbms are no longer safe what do i mean here so the department of health and human services removed the safe harbor from formal rebate payments to pbms as of november of 2020. now with all the craziness that's been going on i don't think a lot of attention has been paid to this but it has implications huge implications for healthcare finance so that's why we're going to talk about it for healthcare today now you remember in a previous a healthcare zone video i explained to you that the anti-kickback statute was created back in the late 1970s as it related to a government-sponsored federal government response program in other words medicare and medicaid which essentially said that vendors could not provide a kickback to folks that build medicare and medicaid in order to like increase their sales and essentially increase cost of medicare medicaid they're like look you can't give kickbacks to people right and then they said okay well wait wait you know there was lobbying pressure blah blah and they said okay well we'll create this safe harbor from the anti-kickback state statute in other words the safe harbor means that you are allowed to pay a kickback or a commission or essentially what a rebate is right a rebate is essentially a commission okay so and that's my point here for number two is that you know health care is filled with euphemisms and rebate is a euphemism basically a rebate is a commission paid by the pharmaceutical company to the pbm to help encourage sales or whether it's pay to play to get on the formulary i mean there's a gazillion ways to think about it but it's not a rebate it's a commission okay so now because of the removal of safe harbor in other words now the rebates are subject to the anti-kickback statute and as as a result of being subject to the anti-gay pact section you cannot pay a kick back to the ppm anymore and the money whether you call a rebate or a commission has to now go to the seniors okay and per the study that i will leave a link to in the show notes they estimate that on an annual basis that a senior will see savings of about 381 dollars to 1522 per person per year now if you're a senior on a fixed income getting social security that's real money and that's money that used to go to the pbm that is now going to be going to the senior now of course the pbm and the insurance carriers that own them are crying poor and they're saying well we're just going to have to increase our premiums to make up for the decreased revenue now look in a competitive marketplace they would have to compete with each other now as long as they're not colluding then they would still need to compete on price of their premiums so it's not guaranteed that they have to quote unquote raise their premiums right so just because they lose their rebates it's not required that they raise their premiums so we'll see what happens now here's where it gets really interesting so as i previously reported on a healthcare z so cigna obviously owns express scripts and actually in the fall late summer fall of 2020 then cigna actually renamed the whole express script side of the business they called it evernote it's basically the cigna version of optum right optim's got optimrx evernorth has their clinical services you know prior off um called evercore and they also have um express scripts in there and they call it evernote now anyway evernote has a subsidiary called ascent health services what in the world does it say health services it is a group purchasing organization a gpo that's based in switzerland so why in the world would express groups need to create a group purchasing organization aha because group purchasing organizations still have safe harbor from the anti-kickback statute so in other words gpos can still legally get commissions from gov for eve and charge government programs even though they're getting commissions so what they do is and oh by the way cvs then over the summer did the same thing they started a gpo called zinc probably this is just my opinion probably for the same reason now they don't call it a rebate anymore so now they go to the pharmaceutical company and they say okay we're going to charge you an administrative fee again call it what you want it is money being paid by the pharmaceutical company to the pbm and it's an admin fee that's going to a gpo therefore it falls under safe harbor from the anti-kickback statute so the money from the government can keep flowing to signix road trips and cvs aetna okay now the save harbor from the anti-kickback statute is only for government payers this does not apply to employers as an employer you might want to do exactly what hhs is doing right hhs is a payer just like an employer the payer and obviously hhs can like do what it wants and you as an employer you might want to do the same thing but you can't because you're not the government so just know that everything i'm talking about here is it relates to federal government programs not to employer-sponsored health plans so if the pbms are still paying uh rebate commission or if the pharma pharmaceutical companies are still paying rebate commissions to the pbms they can still do that for commercial plans okay this is just for the government payers and that's the point i wanted to make today thank you for watching a healthcare z