How it works: The now-dead proposal would have overhauled the rebates collected by pharmacy benefit managers — the middlemen between insurance plans and drug companies.

• They negotiate discounted prices in the form of a rebate, but keep some of those rebates for themselves as profit.
• Trump’s proposal would have banned that arrangement in Medicare and Medicaid, requiring PBMs to pass the rebates on to patients at the pharmacy counter and find a different way to bring in their own revenues.

What they’re saying: “Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” Deere said.

• “The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” he added.

Between the lines: This is very bad news for the pharmaceutical industry, which blames middlemen for high drug prices and vocally supported the proposed rebate overhaul. It’s very good news for insurers and PBMs.

• Independent critics of the proposal argued it did nothing to require drugmakers to lower their prices and would’ve cost taxpayers hundreds of billions of dollars.

What’s next: This will increase the pressure for the administration to finalize its other major drug-pricing push — which the pharmaceutical industry loathes.

• That proposal would set Medicare’s prices for certain drugs based on the prices other countries pay. It likely “will be the executive order of choice,” a source close to the administration said.
• The plan is also controversial among Republicans, who are hesitant to set drug prices.

What we’re watching: The administration is also open to a controversial proposal being discussed in the Senate that would limit how much drug companies can increase their prices within Medicare’s drug benefit.

• “Driving down outrageous price hikes in prescription drug prices is a priority for the President, and a policy like an inflation cap for Part D drugs is something the Trump administration is seriously considering,” a senior administration official said.

Go deeper: The complicated politics of Trump’s rebate rule

The government just has to open up the VA medication purchasing contract to all community pharmacies.. The get some of the lowest prescription medication prices in the country. Reimburse the pharmacy for the cost of the medication and let the pharmacies determine what the copay is for the pt.  Let the free market determine which community pharmacies prosper or fall by the wayside..  Let the pt decide if they are comfortable – or willing – to pay a higher copay for better, more convenient service or prefers to wait in line and pay a few dollars less out of pocket for their prescriptions.   The PBM’s can still be in the process – back to their original design – a processor of payments… the government will negotiate with them to how much the feds will pay over the cost of the medication – based on the VA contract – to cover their overhead.  Will it happen – NOPE – too easy and too transparent for the insurance/PBM industry.