October 16, 2018

Trump wants drugmakers to include prices in drug ads—but PhRMA has their own idea

Daily Briefing

    HHS Secretary Alex Azar on Monday unveiled a much anticipated proposed rule that would require prescription drugmakers to include their products' list prices in direct-to-consumer television advertisements.

    The announcement came just hours after Pharmaceutical Research and Manufacturers of America (PhRMA) said its members would voluntarily begin directing consumers to company websites with pricing information for their products—a move experts characterized as an attempt to pre-empt The Trump administration's regulatory changes, according to the Washington Post.

    Our take: Rx drug ads may soon have to disclose their prices. Will that actually lower prices?

    PhRMA said by April 15, 2019, every advertisement from its members that includes a drug's name also will include a voiceover or text that directs consumers to visit a company-sponsored website that will display pricing information. According to PhRMA, the websites will include information on drugs' list prices, consumers' expected out-of-pocket costs, and programs available to help patients pay for drugs. However, the group said it could not require its members to follow any standard format for determining which pricing information to share or how to share it.

    According CNBC, PhRMA has 33 member companies, including Eli Lilly, Johnson & Johnson, Pfizer, and other major pharmaceutical companies.

    Azar says PhRMA's effort doesn't go far enough, announces regulatory action

    Azar called PhRMA's announcement a "small step in the right direction," but said "placing information on a website is not the same as putting it right in an ad, and it's taken them five months since [President Trump issued his drug pricing] blueprint to start skating to where the puck is going." Trump's blueprint called on FDA to look into potentially requiring drugmakers to disclose prices for their products in advertisements.

    As part of that effort, Azar in a speech at a National Academy of Medicine meeting said CMS proposed the new rule, which would require drugmakers to include list prices in television advertisements for Medicare- and Medicaid-covered drugs with list prices greater than $35 per month.

    The proposed rule would require drugmakers to note the list price for a typical treatment course for acute medications like antibiotics, or the list price for a 30-day supply of medications that are taken each month to treat chronic conditions. Drugmakers under the rule would have to include a "legible textual statement" with the information at the end of their advertisements, CMS said.

    According to Modern Healthcare, CMS estimates that the proposed rule currently would affect 25 pharmaceutical companies that run approximately 300 different drug ads on television each quarter. The agency projected that complying with the proposed rule would cost drugmakers $5.2 million during the first year of implementation and $2.4 million in subsequent years, Modern Healthcare reports.

    Under the proposed rule, the HHS Secretary would keep a public list of drug advertisements that do not comply with the requirements.

    CMS in the proposed rule also is seeking comments on whether the requirements should apply to advertisements on the radio, websites, and social media sites, as well as those published in magazines and newspapers.

    CMS is accepting public comments on the proposed rule through until Dec. 17.

    Admin touts proposed rule as a way to lower prices, but industry pushes back

    CMS said the proposed rule would help "inject greater transparency into the prices prescription drug manufacturers set and would give beneficiaries important information they need to make informed decisions based on cost, while concurrently providing a moderating force to counteract price increases."

    But PhRMA President Steve Ubl said requiring drugmakers to disclose medications' list prices in advertisements would be "very confusing, misleading, lac[k] appropriate context, and isn't what patients want or need." He explained that those prices would not reflect what most patients would actually pay for the drugs, and instead could deter patients from seeking care.

    Ubl also expressed concerns about whether the federal government legally can require drugmakers to include list prices in advertisements, saying such a requirement might violate the First Amendment of the Constitution.

    But CMS in the proposed rule wrote that it has the power to implement such requirements because the agency is charged with "minimizing unreasonable expenditures" in Medicare and Medicaid. The proposed rule states, "Increased price transparency will help reduce unreasonable expenditures associated with soaring drug costs by providing manufacturers with an incentive to reduce their list prices by exposing overly costly drugs compared to alternatives to public scrutiny, and providing consumers with price information to facilitate more informed health care decisions."

    Experts weigh in

    Separately, Rachel Sachs, an associate professor of law at Washington University School of Law, said it is not clear how or whether requiring drugmakers to advertise their drugs' prices would bring them down. However, she said, "With that aside, what PhRMA is doing here is obviously an attempt to preempt some of the public concern," adding, "Realistically, how many patients are going to the website? And if they do go, the additional pieces of information could be even more confusing."

    The American Medical Association praised the proposed rule, saying it would "give consumers a data point that is currently unavailable." But the group said the proposed rule will not completely address the "often-misleading nature of prescription drug ads."

    Matt Eyles, president and CEO of America's Health Insurance Plans, also praised the proposed rule. He said, "Drug prices are out-of-control, and we commend the administration for taking such bold action to lower prices for patients, proposing that manufacturers would be required to disclose their prices in most direct-to-consumer advertisements" (Luthi/Dickson, Modern Healthcare, 10/15; CMS release, 10/15; HHS release, 10/15; Swetlitz, STAT News, 10/15; Morse, Healthcare Finance News, 10/15; Johnson, Washington Post, 10/15; Weixel, The Hill, 10/15; LaVito, CNBC, 10/15; Karlin-Smith, Politico, 10/15; Porter, HealthLeaders Media, 10/15).

    Five ways to control the flow of drug expenditures

    Prescription drug expenditures are the fastest growing component of health care spending. And while reducing unwarranted prescribing variation is the single biggest improvement opportunity, there are several other near-term chances to reduce spending and grow revenues.

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