President Trump Withdraws Plan to Eliminate Drug Price Rebates

The Trump administration has abandoned a centerpiece of its efforts to address high drug prices, backing away from requiring some discounts to be passed directly to consumers under Medicare that could have lowered their out-of-pocket costs.

President Trump had announced the proposal with great fanfare in January as part of the administration’s efforts to deal with the rising costs of prescription drugs, which have fueled public outrage. But the decision to kill the proposal is the second time this week that Mr. Trump’s drug-pricing initiatives have failed. On Monday, a federal judge threw out a rule that would have required pharmaceutical companies to list the price of their drugs in television advertisements.

In a statement Thursday, Judd Deere, a spokesman for the White House, said, “Based on careful analysis and thorough consideration, the president has decided to withdraw the rebate rule.”

The rebate rule had long met resistance from within the White House, where fiscal conservatives had balked at the potential cost. The rule was expected to raise drug-plan premiums for all Medicare beneficiaries, and in May, the nonpartisan Congressional Budget Office concluded that the rule, if adopted, would cost taxpayers $177 billion within 10 years.

The administration and leading members of Congress have been discussing some other legislative proposals, including negotiating directly with companies to set caps on some drug prices. The president also announced last week that he would issue an executive order that might somehow connect prices in the United States to those charged by companies in overseas markets, but the details remained unclear.

“President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” Mr. Deere added.

The news, reported earlier by the news outlet Axios, also dealt a blow to the drug industry. It had strongly backed the measure and tried to blame pharmacy benefit managers for rising prices.

The rule would have essentially done away with after-the-fact rebates that drug companies pay to the private companies that operate Medicare’s Part D drug plans, and instead required that any discounts be passed to consumers at the pharmacy counter. Medicare beneficiaries with high drug costs often have to pay a drug’s list price, or a percentage of it, during certain phases of their coverage. They were required to do so even though, in many cases, the companies operating the plans were collecting rebates on the same drug.

The rule had been opposed by the insurers and pharmacy benefit managers who operate Medicare’s drug plans because they said they used the rebates to pressure drug companies to keep their prices low, and used the savings to keep premiums low for all Medicare beneficiaries. But the drug industry has been campaigning for years on the idea that it is unfair for insurers to keep the rebates when consumers are paying the list price through high deductibles.

Alex M. Azar II, the secretary of health and human services, had been a strong proponent of the proposed rule, which he said addressed one of the key reasons the market for drugs is broken.

In a statement, Caitlin Oakley, a spokeswoman for Mr. Azar, said he and Mr. Trump were working together on a range of other drug-pricing proposals. “Secretary Azar is fighting alongside President Trump to lower prescription drug costs and protect America’s seniors,” she said.