Health and Human Services Secretary Alex Azar and Inspector General Daniel Levinson proposed a rule on Thursday to eliminate safe harbor for companies engaging in kickbacks associated with prescription drug rebates.

Such discounts are currently protected from liability under section 1128B(b) of the Social Security Act, commonly called the “Federal anti-kickback statute.” Instead of permitting pharmaceutical manufacturers to offer discounts to plan sponsors under Medicare Part D, Medicaid managed care organizations (MCOs), and pharmacy benefit managers (PBMs), the rule would enable specific point-of-sale discounts on prescription pharmaceutical products, but protect certain PBM service fees.

A Department of Health and Human Services (HHS) press-release, explained that “PBMs play an important role in negotiating [prices] with drug companies. But if the negotiation favors higher rebates instead of lower cost drugs, it can lead to higher list prices.” HHS believes this rule will create a shift “toward a system that offers true discounts to the patient at the point of sale.”

HHS stressed that “[t]he current rebate system discourages the use of safe, effective lower-priced generics,” because “a growing number of Part D plans have moved generic drugs to non-preferred tiers.” This happens because “insurers and Part D plan sponsors can extract higher rebates for brand drugs.” Such practices can discourage “generic competition” resulting in patients paying more out of pocket.

The press-release indicates that this proposed rule change is “one of the ideas put forth in President Trump’s ‘American Patients First‘ blueprint for lowering prescription drug prices and out-of-pocket costs.” Other ideas for stimulating savings for consumers include new tools for Medicare Part D Plans to negotiate deeper discounts for patients, and requiring television advertisements for prescription drugs to disclose the drug’s list price.

The rule is scheduled for publication in the Federal Register on February 6.