White House Should Repeal Drug Rebate Rule as Part of Inflation Reduction Act Agreement

Later today, President Biden will sign the Inflation Reduction Act (IRA). In its original agreement, the IRA would have permanently prohibited implementation of the Rule Relating to Eliminating the Anti-Kick-Back Statute Safe Harbor Protection for Prescription Drug Rebates. This prohibition saved $122 billion through 2031 and more than $500 billion over two decades. Yet in order to satisfy concerns over compliance with the Byrd rule, the final IRA legislation instead merely delays implementation of the rebate rule until 2032. As a result, the bill will save substantially less over the long term and could set up a budget gimmick whereby future lawmakers could use continued delays beyond 2032 to “offset” future near-term borrowing.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Policymakers agreed to end this rebate rule, and they should abide by that agreement. Because the rule was established by executive action, it can be repealed with similar action, and President Biden should begin the process of ending this rebate rule as was originally agreed to.

The rebate rule repeal was responsible for one-third of the second decade deficit reduction in the bill. Allowing the rule to return in 2032 would cost the federal government about $400 billion and drive up the cost of prescription drugs. It could also create a new slush fund that would allow even more deficit-financed spending this decade.

There is broad bipartisan support for preventing the rebate rule from coming into effect, and there is no good reason it should remain on the books. The White House should honor the original agreement and move to end the rebate rule permanently in order to fulfill the original intent of the Inflation Reduction Act.


For more information, please contact Kim McIntyre, Director of Media Relations, at mcintyre@crfb.org