Feds and Pharma Spar Over Drug Costs in TV Ads

Oct. 16, 2018 -- The Centers for Medicare and Medicaid Services wants drugmakers to list the price of pharmaceuticals in television ads -- even as the industry tried to head off the new rules by promising to give consumers more information about pricing.

The Trump administration first mentioned requiring drug prices in ads in May, as part of the government's American Patients First plan to lower drug costs. In August, it began officially reviewing a proposed rule.

Members of Congress have also pressed for action. Sens. Dick Durbin (D-IL) and Chuck Grassley (R-IA) won initial backing for their bid to require the ads to list prices, but the House of Representatives stripped money for the project from the U.S. Department of Health and Human Services budget.

Seeing what was coming, the 33 members of Pharmaceutical Research and Manufacturers of America (PhRMA), an industry trade association, said this month that beginning in April 2019, they would include in all drug ads information about a website that would discuss list price, out-of-pocket costs, and patient assistance programs.

Health and Human Services Secretary Alex Azar was not impressed.

"We will not wait for an industry with so many conflicting and perverse incentives to reform itself," he said in an Oct. 15 speech at the National Academy of Medicine. Patients "deserve to know if the drug company has pushed their prices to abusive levels," he said, "and they deserve to know this every time they see a drug advertised to them on TV."

The proposal requires companies to include in all television ads a drug's list price, in text big enough to read, if it is covered by Medicare or Medicaid, and if it costs more than $35 a month. The agency is seeking input on whether the list price should be spoken and not just printed on the screen. The rule only covers TV ads, which account for the majority of the $5.5 billion spent each year on marketing drugs to consumers, according to federal officials. The government is taking comments on whether the rule should be extended to other advertising.

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The proposed rule would not directly lower drug costs. It is hoped that it will shame companies into bringing prices down -- in part, by publishing the names of those who don't comply.

Azar said that knowing a list price is important to seniors on Medicare Part D because they have to pay a percentage of list price for specialty and non-preferred drugs. List prices are also important for those on high-deductible plans who may have to pay a large percentage of that price before insurance coverage starts.

The government has the legal right to demand disclosure of a list price, said Azar, noting that since 1958, car manufacturers have been required to post sticker prices. "There is no reason it should be any different for drugs," he said, noting that the pharmaceutical industry has resisted the change.

"It is no coincidence that the industry announced a new initiative today that will help make price and cost information more accessible," he said. "But placing information on a website is not the same as putting it right in an ad, and it's taken them 5 months since the president's blueprint to start skating to where the puck is going," he added.

Voluntary Disclosure Coming

In an Oct. 15 briefing with reporters, PhRMA President and CEO Stephen Ubl said that list prices are irrelevant -- because they aren't what patients pay at the pharmacy -- and that putting them in an ad without context might scare patients away from seeking needed medical care. Besides, patients don't care about list price, he said.

"The research that we've done shows that what patients really want and need is an estimate of what their out-of-pocket costs are, not necessarily the list price or component cost of their health care services," Ubl told reporters.

People who watch ads will be directed to a drug company's website to find out more about list prices, out-of-pocket costs, insurance coverage, and patient assistance. Each site will be different because antitrust laws keep PhRMA from demanding a particular format or style, said Ubl.

Regardless, the information provided will be important, and the industry is taking concerns about pricing to heart, he said. "Our members take this very seriously, and you'll see robust action in the coming months."

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He declined to say whether the industry would sue if the government followed through on its proposal. But, said Ubl, the industry thinks it's on solid footing, citing prior rulings that stopped the government from requiring a particular kind of speech.

Both Azar and Seema Verma, administrator for the Centers for Medicare and Medicaid Services, said drug companies aren't going far enough. "While the pharmaceutical industry's action today is a small step in the right direction, we will go further and continue to implement the president's blueprint to deliver new transparency and put American patients first," Azar said in a statement just after PhRMA's announcement.

Hollow Moves?

Not everyone applauded the government’s proposal. Peter Maybarduk, director of Public Citizen's Access to Medicines Program, called the dueling Centers for Medicare and Medicaid and PhRMA announcements "a sideshow." "PhRMA's refusal to accept even the Trump administration's proposed modicum of transparency should make it obvious that our leaders need to fight for real and much larger stakes," he said in a statement.

But the feds have done no better, in his estimation. "The Trump administration should give up its charade of toughness and champion reforms that would bring meaningful relief to patients and consumers by leveraging government negotiation power, stopping price spikes, and curbing monopoly abuses," he said.

Another consumer organization, Families USA, called the proposal a welcome step. "People will be shocked to know how much their drugs really cost," Frederick Isasi, executive director of the group, said in a statement.

"This policy will focus public attention on the abusive prices charged by many pharmaceutical manufacturers," he said. It will also help consumers "better assess the value of a new drug -- that is: Is it really worth the price?"

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