UPDATE: On July 8, a federal judge struck down the Trump administration’s rule that would have forced pharmaceutical companies to disclose the wholesale prices of their drugs in television ads. The court said the Department of Health and Human Services lacked authority from Congress to compel drug makers to disclose list prices. The article below first appeared June 26 and raised many of the same points that the court included in the ruling.
By S. Lawrence Kocot
Beginning July 9, new federal rules will require pharmaceutical manufacturers to disclose the wholesale acquisition cost (WAC) or “list price” of most Medicare and Medicaid brand name prescription drugs (that cost $35 per month or more for a 30-day supply) when they are advertised direct-to-consumers (DTC) on television. This TV DTC advertising drug price disclosure rule, released as part of the Trump Administration’s efforts to tackle escalating drug prices, is intended to increase public scrutiny of drug pricing and provide patients with more transparent information to improve their healthcare decision-making. But, can it achieve those goals?
Advocates of direct-to-consumer advertising contend that TV advertising raises awareness about medical conditions and leads to more informed discussions between patients and healthcare providers. However, CMS has observed that DTC advertising can drive demand for more costly medications seen on television at the expense of lower-cost, equally-as-effective alternatives.
This final rule may temper that demand by disclosing prices, but it could have unintended consequences as the list prices that will be disclosed to patients are much higher than any patient generally has to pay. Indeed, some researchers have expressed concerns that some patients may avoid treatment altogether due to the sticker shock of these inflated advertised prices.
Although there is conflicting evidence as to how patients respond to price disclosures in healthcare generally, it will take many months after the rule goes into effect to more fully understand the impacts that this WAC disclosure requirement will have on patient choice and provider prescribing. At the same time, another recently finalized CMS rule may have an even greater impact on Medicare beneficiary price sensitivity than the television DTC rule. Beginning in the 2020 Medicare Plan year, Medicare Advantage and Medicare Part D plans are required to offer real-time benefit check technology to help providers share likely out-of-pocket costs with patients at the time of prescribing. When integrated with physician electronic health record workflows, this will enable providers and patients to consider lower out-of-pocket costs on specific Medicare covered drugs at the time of prescribing. More accurate drug cost information at the point of prescribing is likely to be much more useful to patients than a television disclosure of a price that is irrelevant to most patients as they consider their out-of-pocket costs for Medicare drugs.
According to the TV DTC advertising drug price disclosure rule, the Secretary of Health & Human Services will maintain a public list that would include the prescription drugs and biological products advertised in violation of the requirements of the rule. In addition to “shaming” manufacturers with high list prices, HHS believes the “primary” enforcement mechanism will be the threat of private actions. However, the likelihood of private actions is speculative and it is not clear that disclosure of these list prices will be enough to prompt manufacturers to lower prices when any incremental reduction would still likely be advertised as more than the patient will have to pay for the drug.
While the fate of this regulation may very well be decided by the courts, the TV DTC advertising drug price disclosure rule demonstrates how difficult it is to design regulatory approaches to reduce drug prices, which are generally not set by government regulation. The Administration may find more success helping patients select the most appropriate drug at the lowest price through market-based initiatives that provide more actionable comparative cost information for patients at the point of prescribing, which should help realign incentives and promote more competition to control price growth.
Kocot is national leader of KPMG’s Center for Healthcare Regulatory Insight. For more information or to arrange an interview, please contact Bill Borden.