May 22, 2020

Drug Prices in Advertisements

How it could work

Including drug prices in advertisements proposes to lower drug spending in two ways: 1) encouraging patients to choose lower-cost therapies; and 2) creating price competition among similar therapies, pressuring drug manufacturers to lower drug prices to affordable levels. In theory, patients should be sensitive to a drug’s price, and more transparency across drug prices would lead manufacturers to compete on price. However, patients may not be able to forego a necessary drug, regardless of price, and patients generally pay cost-sharing set by their insurer, which may not be related to a drug’s standard price.

In mid-2019, the Trump Administration finalized a rule under the Centers for Medicare and Medicaid Services (“CMS”) requiring drug manufacturers to include the list price of a drug in any Direct-to-Consumer (“DTC”) advertisements. Under this requirement, manufacturers must include a statement detailing the list price for a 30-day or otherwise typical supply of the drug while noting that costs may be different for patients with insurance. Drug manufacturers must include this statement for any drug that is covered by the Medicare or Medicaid programs. If the manufacturer does not include this statement, the manufacturer would be subject to a private lawsuit alleging unfair competition via false or misleading advertisement; the government would not engage in direct enforcement. CMS declined to estimate savings under the rule, citing a lack of data or examples that could be relied upon. A federal court struck down the rule shortly after it was finalized, but the Trump Administration is appealing that decision.

What the experts think

The expert panel agreed that including drug prices in advertisements would not reduce drug spending. Experts were unanimous in their belief that net prices of drugs would be unaffected and the majority believed list prices would also be unaffected, though just under half of the experts believed list prices would moderately decrease. Experts generally agreed that including prices in advertisements would have no effect on patient access, with some opining that it would moderately decrease access.

Experts were split on whether including drug prices in advertisements advances drug spending policy, with equal numbers believing that it does not  or that it minimally advances policy (one expert opined that it moderately advances policy). Experts agreed that the magnitude of drug spending impact and the evidence base in support of the policy were weaknesses of the policy. Experts believed that the ability to implement the policy and the size of the affected population tilted toward its strengths, but they generally agreed that the precedent-setting value of the policy was unknown.

How likely would this policy be to reduce drug spending?
Would Increase Drug Spending
Would Not Affect Drug Spending
Would Minimally Reduce Drug Spending
Would Moderately Reduce Drug Spending
Would Significantly Reduce Drug Spending
Would Substantially Reduce Drug Spending
How likely would this policy be to reduce drug prices?
Would Significantly Increase Drug Prices
Would Moderately Increase Drug Prices
Would Not Affect Drug Prices
Would Moderately Decrease Drug Prices
Would Significantly Decrease Drug Prices
List Prices
Net Prices
How likely would this policy be to increase patient drug access?
Would Significantly Reduce Drug Access
Would Moderately Reduce Drug Access
Would Not Affect Drug Access
Would Moderately Increase Drug Access
Would Significantly Increase Drug Access
Rare Disease
Large Patient Groups
How significant is this policy in the evolution of US drug spending policy?
Does Not Advance Drug Spending Policy
Minimally Advances Drug Spending Policy
Moderately Advances Drug Spending Policy
Significantly Advances Drug Spending Policy
Ground-Breaking Shift in Drug Spending Policy
What are strengths and weakness of this policy?
Size of Affected Population
Evidence Base in Support of Policy
Precedent-Setting Value
Magnitude of Drug Spending Impact
How important are the following in your analysis of the policy's impact?
Not Important
A Little Important
Somewhat Important
Very Important
Does not prohibit messages that cut against inclusion of list price
List/net price discrepancy means list prices of little value to consumers
Questionable legality of required disclosure
Co-pay assistance coupons can rebut effect of high list price
Unclear how list price transparency would affect net prices
No realistic enforcement mechanism
No estimate of potential savings

Considerations for policymakers

Experts highlighted several considerations for policymakers. The most important considerations include the relative value of list prices in advertisements for consumers given the discrepancy between list and net prices as well as the rule’s failure to prohibit messages that cut against the inclusion of list price. Other considerations include the power of co-pay coupons to rebut the effects of a high list price, uncertainty of how list price transparency would affect net prices, the lack of a realistic enforcement mechanism, the lack of any savings estimate, and the questionable legality of the required disclosure.