The Trump administration just proposed a ban on a little-known practice in the pharmaceutical industry that's been blamed for high drug prices

AP

Alex Azar, the US Secretary of Health and Human Services.

• The Trump administration just proposed a new rule that could bring down the cost of prescription drugs for patients.
• The Department of Health and Human Services wants to ban some payments, called rebates, between drugmakers and middlemen.
• Rebates are negotiated between middlemen called pharmacy benefit managers and drugmakers, and are linked to individual drugs. They're usually passed along to health plans, but don't always make it to the patients taking the drugs.
• These rebates have been historically protected from the Anti-Kickback Statute.

The Trump administration just made a big move against a little known pricing practice that the pharmaceutical supply chain depends on.

On Thursday, the Department of Health and Human Services said that it's proposing a rule that would effectively ban the use of rebates for pharmaceutical drugs. HHS said the move is designed to lower the cost of prescription drugs for patients, a major goal for the administration.

Rebates, which drugmakers pay out more than $100 billion of, are a big business for pharmaceutical middlemen (otherwise known as pharmacy benefit managers) like Express Scripts, CVS Caremark and OptumRx.

While these rebate payments - which act as incentives to pick one drug to cover over a competitor - may sound a lot like a kickback, they're technically protected from the Anti-Kickback Statute.

That would no longer be the case under the new proposed rule. Instead, the protection would apply to discounts given at the pharmacy counter directly to patients. Drugmakers would also be able to pay PBMs a fixed fee for their services, rather than rebates.

Read more: The Trump administration has a little-known practice in the pharma industry in its crosshairs