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Rebate Rule Elimination Will Protect Seniors from Premium Increases, Help Pay for Other Urgent Priorities


The Biden Administration should work with Congress and act now to eliminate the Rebate Rule, stop damaging Medicare premium increases for seniors, and use the savings for other urgent priorities.

One of the most expensive federal regulations ever proposed, the Rebate Rule has a price tag of more than $170 billion over the next ten years, according to the Congressional Budget Office. At this critical moment, billions of dollars in savings from eliminating it could be used to fund public health, extend new subsidies for coverage under the Affordable Care Act, begin new infrastructure projects, strengthen the economy, pay down the national debt or address any number of other urgent priorities.

But the Rebate Rule doesn’t just cost taxpayers in terms of higher spending – it would further cost seniors by raising their premiums in Part D. After years of stable – and even decreasing – average premiums, the Rebate Rule would raise seniors’ Part D premiums by as much as 25%, according to the Department of Health and Human Services (HHS). 

The harm to seniors has stakeholders from across the political spectrum – from AARP to the American Enterprise Institute – calling for the elimination of this misguided policy. Further, its rushed announcement in the final months of the Trump Administration – at the urging of big drug companies – even drew concerns from a nonpartisan government watchdog. Analysts and experts on both sides of the aisle are clear: to protect seniors from Medicare premium increases, the Rebate Rule must be eliminated.

For decades, Medicare Part D has been one of the most successful public-private partnerships, providing millions of seniors access to affordable prescription drugs and innovative new treatments while keeping premiums low. The Rebate Rule threatens that success.

The Rebate Rule’s fundamental flaw is its failure to address the root cause of high drug prices: the list prices set and raised arbitrarily by pharmaceutical manufacturers. Pharmaceutical companies alone set prices for their drugs. The Congressional Budget Office reported earlier this year, “A drug’s sunk R&D costs—that is, the costs already incurred in developing that drug—do not influence its price.”

Drug companies raise their prices at will, often in concert with one another, and have even continued to increase costs in the midst of a global pandemic. The Trump-era Rebate Rule does nothing to prevent them from continuing to do so, and nothing to reduce prescription costs for seniors.

Senior citizens have borne the brunt of the pandemic’s deadly toll over the past year. As we emerge from the pandemic, seniors should not face the new burden of increased premiums to afford the medications they need to live healthy and happy lives.

While the White House missed an opportunity to include it in the President’s budget, there is still time to act. The White House and Congress should not miss this window of opportunity to stop damaging premium increases for seniors. The Biden Administration should work with Congress to eliminate the Trump-era Rebate Rule and put those savings towards urgent policy priorities. It’s a win for seniors and for all American taxpayers.