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Clinical Pathways GPS

How the Proposed Elimination of Medicare Rebates Would Impact Clinical Pathways

Authored by

Richard G Stefanacci, DO, MGH, MBA, AGSF, CMD—Column Editor


The Access Group, now part of EVERSANA™, Berkeley Heights, NJ


Dr Stefanacci is the chief medical officer for The Access Group, a managed markets agency for pharmaceutical companies, now part of EVERSANA™.


J Clin Pathways. 2018;4(9):41-42. doi:10.25270/JCP.2018.11.00047

The Centers for Medicare & Medicaid Services (CMS) has published a range of new proposed and final rules regarding payment rates and policies affecting providers, payers, and patients. The Trump administration has also laid out a plan aiming to promote better competition and negotiation of drug prices. One proposed change is to eliminate pharmaceutical rebates in the Medicare system and potentially replace them with pharmaceutical patient assistance programs, ultimately impacting drugs’ formulary placement. As a result, health systems will need assistance when assessing the value of drug treatments. Clinical pathways can serve as a means to assist health systems make these assessments by integrating “beyond-the-pill” offerings that accompany medications and contribute to the ultimate clinical and financial outcomes of the treatment. 

Policy changes often have far-reaching effects that may not be readily visible. One such recent change is the proposal to eliminate pharmaceutical rebates in the Medicare system,1 potentially replacing them with pharmaceutical patient assistance programs (PAPs). Since health systems’ clinical pathways often have a foundation in work done by national associations or clinical pathway organizations and are then made specific to a health system’s own pharmaceutical rebate-based preference, the elimination of these rebates means health systems will need help assessing the value of pharmaceutical treatments. 

Without rebates that make some treatments more financially advantageous, leading to their formulary placement, new pathways may need to take into account care factors that impact clinical and financial outcomes outside of just rebates and clinical studies. For example, treatment differentiation would need to be based on factors beyond rebate pricing to include “beyond-the-pill” offerings—supportive products, services, and resources provided beyond medication that improve patient outcomes.2 This is especially impactful for physicians and health systems whose responsibilities are increasing for treatment selection through their own clinical pathways based on value-based engagements with specific pharmaceutical products. 

Removing Pharmaceutical Rebates

Medicare has long allowed pharmaceutical companies to provide rebates to stakeholders to gain preferred status. This allowance came with a prohibition on pharmaceutical-sponsored PAPs. Recently, the Trump administration has proposed eliminating rebates in Medicare by withdrawing the “safe harbor” in anti-kickback laws that has permitted pharmaceutical manufacturers the ability to negotiate with payers for formulary placement.3,4 Congress passed the Anti-Kickback Statute almost 50 years ago to prevent pharmaceutical manufacturers from offering inducements to patients to use their products over others, but the law was amended to give the Secretary of Health and Human Services the power to determine which practices deserve “safe harbor” from kickback enforcement: pharmaceutical rebates gained this safe harbor status.5 Without these rebates, pharmaceutical manufactures will need to use other factors to differentiate their product from others, which could include beyond-the-pill type resources.

Beyond the Pill

In July 2015, Sachin H. Jain published an article explaining why medicines alone are often not enough for patients to achieve optimal clinical outcomes.2 Resources provided in support of a prescribed treatment can have a large impact on clinical outcomes through improved adherence or even a placebo effect based on patients’ perception of a treatments benefit. Many pharmaceutical companies already offer beyond-the-pill resources such as disease-specific management apps or text-based reminder programs—all in an effort to increase adherence and improve outcomes. With no ability to differentiate a product based on rebates, resources beyond medications will likely be utilized to increase a product’s value in the eyes of health systems through their ability to improve accountable clinical and financial outcomes. These factors may change the listing of preferred treatments in future pathways, as pathways will also need to include what additional resources are available that accompany a medication/treatment and how to access them. 

Patient Assistance Programs

The potential for the allowance of PAPs, which may be offered in exchange for the elimination of rebates, will likewise change preferred treatments and available resources within clinical pathways. Given that providing PAP would directly reduce patient out-of-pocket (OOP) costs, adherence would improve, as demonstrated by multiple studies.6-8 The reduction in patient OOP costs and increase in patient adherence would improve overall clinical and financial outcomes. As such, including the PAP resource in a health systems’ clinical pathway can be beneficial not only for patients through lower OOP costs and improved outcomes but also for payers through improved real-world and financial outcomes.

From a health system perspective, PAPs can be of benefit when utilized to improve adherence and when occurring through the managed care organization’s utilization management process. However, health systems view PAPs as problematic when they are used to circumvent the use of a health system’s preferred treatment. As such, clinical pathways would have to integrate an ability to restrict the use of PAPs until the preferred treatment has been accessed following the plans prescribed utilization path, after which PAP can be used solely for adherence rather than a means to bypass preferred treatment use.

Articulating Value

While the articulation of pharmaceutical product value continues to start with clinical efficacy in areas where a drug is effective with no clinical differentiation and no ability for rebating advantage, the sole differentiation may be beyond-the-pill benefits. These benefits can be general or health-system specific, outlined through unique value-based engagements between a health system and pharmaceutical manufacturer. These kinds of value-based engagements will exist more easily alongside accountable care organizations and bundled payment models where the Centers for Medicare & Medicaid Services provides an independent accounting of the clinical and financial outcomes. 

Collected outcomes data will also play a significant role in the articulation of value between pharmaceutical manufacturers and clinical pathway decision makers. In drug classes with little to no clinical differentiation of products, manufacturers will need to present real-world evidence for their products and their beyond-the-pill solutions for preferred status in clinical pathways.


All of these changes—the expanded role of health systems, elimination of Medicare rebates, allowance of PAP in Medicare, and at-risk payment models—will increase the importance and design of clinical pathways such that factors beyond the pill will dictate preferred treatments and resources available to improve clinical and financial outcomes. Clinical pathway development committees must take all of these factors into consideration in the revision, adaptation, and enhancement of future clinical pathways.


1. Thomas K. Meet the rebate, the new villain of high drug prices. The New York Times. Published  July 27, 2018. Accessed October 23, 2018.

2. Jain SH. How pharma can offer more than pills. Harvard Business Review. Published July 23, 2015. Accessed October 23, 2018.

3. US Department of Health & Human Services (HHS). American Patients First, The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. Published May 2018. Accessed October 23, 2018. 

4. Hill R, Metro JW. OIG moving ahead on changes to anti-kick-back safe harbor protection for drug rebates to plans, PBMs [blog]. Health Industry Washington Watch. Published July 20, 2018. Accessed October 23, 2018.

5. US Department of Health & Human Services (HHS), Office of Inspector General (OIG). A roadmap for new physicians, fraud & abuse laws. website. Accessed October 23, 2018. 

6. Eaddy MT, Cook CL, O’Day, Burch SP, Cantrell, CR. How patient cost-sharing trends affect adherence and outcomes. PT. 2012;37(1):45-55.

7. Farias AJ, Hansen RN, Zeliadt SB, Ornelas IJ, Li CI, Thompson B. The association between out-of-pocket costs and adherence to adjuvant endocrine therapy among newly diagnosed breast cancer patients. Am J Clin Oncol. 2018;41(7):708-715.

8. Farias AJ, Du XL. Association between out-of-pocket costs, race/ethnicity, and adjuvant endocrine therapy adherence among Medicare patients with breast cancer. J Clin Oncol. 2017;35(1):86-95.

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