What You Need to Know About Drug List Prices and DTC Ads

What You Need to Know About Drug List Prices and DTC Ads

Consumers, healthcare providers and health insurance organizations should brace themselves for what's to come: drug companies might soon have to include drug prices in their TV ads. Feedback from the public leave the CMS - who proposed this rule - with a lot to think about.

Update (May 10, 2019): This week, the Trump administration officially announced that list prices will be required on all direct-to-consumer (DTC) television ads for prescription drugs and biological products. Since the White House unveiled its four-part plan to reduce drug prices last year, tensions have been rising between pharma companies, insurers, middlemen and government officials. Pharma companies generally believe the price tag will confuse consumers and drive down their own profits while HHS Secretary Alex Azar and CMS Administrator Seema Verma say the list price will empower consumers to make informed choices about their healthcare. Johnson & Johnson and Eli Lilly are among the early adopters of this rule, adding pricing information to their ads at the start of 2019. The Federal Register published the final rule today, set to take effect on July 9, 2019.

Originally published on January 7, 2019:

In 2018, US pharmaceutical companies spent over $3.7 billion on television advertisements. Direct-to-consumer (DTC) ads for pharmaceuticals, aimed at promoting a particular medication to a patient, are permitted only in the US and New Zealand. AbbVie is one American pharmaceutical company which boasts a slew of TV commercials behind Humira (adalimumab), used to treat conditions like psoriatic arthritis and Crohn’s disease. Here is a commercial for Humira which aired in 2018:

A man feels he is “missing out” on his life due to recurring symptoms of Crohn’s disease, but after learning about Humira, he might have a chance to feel like himself again. After a long list of possible side effects, the commercial concludes with the Humira logo and slogan, with tiny text reading “Pay as little as $5 a month” – the only indication of the drug’s price through the entire 60-second ad.

A person with excellent healthcare insurance might pay $5, but for many Americans, the price tag could be much higher. In fact, the average list price for Humira is nearly $5,500, according to GoodRx. To the majority of Americans, pharmaceutical drug pricing is about as clear as mud.

New Rule Proposal: List Drug Prices in Your Ad

The effort to improve drug pricing transparency has been in full swing since late-August 2018. That is when US Senators Chuck Grassley, R-Iowa, and Dick Durbin, D-Ill saw their amendment to add drug prices to pharmaceutical ads pass unanimously in the Senate. Shortly after, the amendment was called off.

However, the rule was revived by the Department of Health and Human Services (HHS) Secretary Alex Azar in October 2018.

The Centers for Medicare and Medicaid Services (CMS), operating under HHS, proposes that drug manufacturers should list the Wholesale Acquisition Cost (WAC) or list price in ads for drugs covered by Medicaid and Medicare. The CMS’ proposed rule asks companies to list drug prices over a typical course of a treatment or per month if the therapy is used to treat a chronic disease. If the drug costs less than $35, its price will not have to be displayed in TV ads.

According to Azar, this rule aligns with the Trump Administration’s priority to lower drug prices.

“This historic proposal is an important way to create new incentives for drug companies to start lowering their list prices, rather than raising them,” he said. “President Trump’s drug-pricing blueprint called for HHS to consider how to accomplish this goal, and now we are following through on this measure to better inform patients, help them lower their drug costs, and reduce unreasonable spending in Medicare and Medicaid.”

The rule intends to help inform consumers of what their potential out-of-pocket costs are and should hopefully drive competition between drug companies. More competition should lower prices and result in happier customers. Upon its announcement, the rule appeared to have support from both political parties.

The day after the HHS announcement, the Pharmaceutical Research and Manufacturers of America (PhRMA), a voluntary, non-profit association that represents pharma research and biotech companies, announced its own plan to increase drug pricing transparency. Notably, their new guidelines require member organizations to “include direction as to where patients can find information about the cost of the medicine, such as a company-developed website, including the list price and average, estimated or typical patient out-of-pocket costs, or other context…”

The HHS did not seem too happy about PhRMA’s attempt to “meet them halfway.” Indeed, they feel a website link on an ad is not transparent enough.

Mixed Feelings About Drug Price Inclusion

Clearly, there were some mixed feelings about the proposed rule among these stakeholders. The CMS invited feedback from the public until late December, and the following is what some big pharma companies have to say.

PhRMA wastes no time in expressing its disdain of the newly proposed rule, reiterating that all its member companies have already voluntarily agreed to its renewed guidelines for drug pricing transparency, set to take effect in April 2019. One of its biggest qualms with the new rule is what they perceive to be misleading drug prices, giving “Medicare and Medicaid beneficiaries the false impression that they are required to pay the full price, rather than a copay or coinsurance.”

Members of PhRMA, including Johnson & Johnson, Eli Lilly and Sanofi Pasteur, echo PhRMA sentiments. All three companies feel that list price disclosure is simply not enough to illustrate the complex drug pricing system. For example, Johnson & Johnson stated that customers might want to know what support systems are available to them that can make the drug more affordable.

Sanofi suggests including a disclaimer which could read, “If you have health insurance that covers drugs, your cost may be different.” To provide sufficient context to a consumer in a 60-120 second TV ad is also impractical, they add.

Being misled by prices can snowball into other problems. High list prices can deter patients from taking their much-needed medicine, resulting is worse outcomes and ultimately increasing costs incurred by Medicare and Medicaid. Sanofi points out that the rule appears to contradict the meaning of value-based care, where the cost-effectiveness of a drug might be evaluated along its clinical efficacy, effectiveness compared to standard of care, economic value of the drug, and contributions of the drug to quality of life. In other words, people might just choose one drug over the other because it’s cheaper without considering which is better for their health.

Proponents of the CMS rule agree that it isn’t perfect. In a joint statement, Senators Durbin and Grassley suggest that pharmaceutical companies should clearly state drug prices in ads in an audible statement, as well as indicate when prices expire and how they fluctuate over time.

Another strong supporter of the CMS rule is the health insurance company, Cigna. They believe the new rule will provide useful information for the consumer, and will not lead to medication non-adherence. They also support the expansion of this rule to apply to other forms of media including print, digital and radio advertising.

What Next?

Taking these comments together, the CMS must decide how to roll out changes if the rule is made official. However, pharmaceutical advertising and drug pricing are inherently complex issues, further complicated by political agendas.

What are your thoughts on pharmaceutical advertising and drug pricing? Share them below in the comments.