Experts divided regarding impact from Trump’s plan to put drug prices in TV ads
HHS recently enacted one of the first concrete steps toward President Donald J. Trump’s pledge to lower drug prices in finalizing a federal rule requiring the list prices of certain drugs be included in television ads.
The initiative was one of many strategies Trump and HHS Secretary Alex Azar announced during last year’s official unveiling of ‘American Patients First,’ the president’s blueprint for lowering drug prices, a 44-page document that details how to “bring soaring drug prices back down to earth ... [and] derail the gravy train for special interests,” Trump said.
While the drug price disclosure requirement was well received by several medical societies, including the AMA, medicolegal and economic experts were less convinced the would have any meaningful impact on pricing.
“For consumers with insurance, the list price likely has no meaning, as the price ultimately paid for that drug is negotiated by the insurer or the insurer’s agent and then the consumer only pays their cost sharing obligation. [Therefore] I am doubtful that including list prices in TV ads will move the needle on drug prices,” Barbara Zabawa, JD, MPH, clinical assistant professor at the College of Health Sciences at University of Wisconsin-Milwaukee said in an interview.
With a significant portion of the American public impacted by this rule, Healio Primary Care asked experts and reviewed the medical literature to provide analysis of the president’s strategy.
Specifics of rule
The rule mandates that direct-to-consumer television advertisements for prescription drugs covered by Medicare or Medicaid include the list price — also known as the Wholesale Acquisition Cost — if that price is equal to or greater than $35 for a month’s supply or for the usual course of therapy, according to Azar.
HHS data indicate the 10 most commonly advertised drugs have list prices ranging from $488 to $16,938 per month or usual course of therapy.
“We believe today’s step on transparency will make prices in health care work much more like they do in any other market: more uniform, more predictable and more competitive,” Azar said at a press conference.
“Requiring drug companies to level with patients about their drug prices is about working towards a system where the patient — not the insurer, not the drug company, not the government but the patient — is in control. We are moving from a system that leaves patients in the dark, to one that puts them in the driver’s seat,” he continued.
Not all patients will necessarily see these ads.
A study published in the American Journal of Preventive Medicine concluded that 43% of U.S. households were exposed to pharmaceutical advertising in 2011.
The same study’s authors reported that the idea of direct-to-consumer advertising is “controversial given its potential impacts on health care.”
“Although studies have shown that direct-to-consumer advertising increases physician visits and treatment requests, examinations of effects on prescribing have yielded mixed results. Some demonstrate strong effects on prescribing or price, whereas others show no prescribing or price effects,” Rachel Kornfield, MA, of the School of Journalism and Mass Communication, University of Wisconsin-Madison and colleagues also wrote.
‘Shaming may not work’
Azar has said several times since announcing the final rule that puts prices in TV ads that “Companies who are ashamed of their drug prices, should change their prices. It’s that simple.”
“It’s not that simple at all,” Raymond March, PhD, research fellow at the Independent Institute and director of FDAReview.org, said.
“Azar is failing to remember that only about 20% of pharmaceutical companies make a profit once research, development and approval costs are accounted for. For the other 80%, changing or lowering their prices in many cases is financial suicide,” March explained in an interview.
Another expert said even if the rule does shame the pharmaceutical companies, the discounts will not be deep.
“Maybe drug companies will reduce their prices by 10% or 15%. Maybe. Even if they do, that is not enough,” Memo Diriker, DBA, MBA, founding director of the Business, Economic, and Community Outreach Network at the Franklin P. Perdue School of Business at Salisbury University in Maryland told Healio Primary Care.
“Here in the U.S. there are some drugs that cost a dollar a pill. While I could see U.S. drug companies building up a lot of hype if they lower their prices 20% to 80 cents, that’s still 80 cents for a drug that in some countries only costs 5 cents a pill. Placing prices in ads is only a cosmetic fix, whereas it requires major surgery,” he added.
Robin Feldman, author of “Drugs, Money, and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices,” and director of the Institute for Innovation Law said that customers hearing the list prices might jolt them to make other drug choices, but that’s highly speculative.
“The shock value may also encourage consumers to look for alternatives and better deals. They may ask themselves: Do I need this drug? Is there a generic? Is there a cheaper alternative?,” she said. “[That said] consumers may not have much choice. At the end of the day, people need their medicine.”
“However, public shaming may not work when there is so much money at stake,” Feldman continued. “Drug companies may figure out how to shift the system so consumers don’t see what is happening. And consumers may just tune out the noise. Does anyone pay attention to fine print in ads or to the warning labels on cigarettes?” Feldman continued.
Test-runs of the rule not sanctioned by HHS provided suggests consumers may listen.
Researchers published an analysis in JAMA Internal Medicine of the responses of 580 people shown fictious ads for a diabetes drug ranging in cost from $50 per month or a “high” price of $15,500 per month to not seeing a price at all. They wrote that consumer responses did not change following the disclosure for the low-priced drug but for the high-priced drug, the disclosure reduced the likelihood of participants asking their physician about the drug, asking their insurer about the drug, researching the drug online and taking the drug.
‘Very little’ impact
“I expect very little change [in drug prices] to come from this rule,” March told Healio Primary Care.
“Until the fundamental reasons for high prices are addressed, transparency laws like this one will only provide another unnecessary reminder of how expensive medications can be."
A pharmaceutical expert told Healio Primary Care the Trump administration’s shortsightedness, instead of taking a long hard look at the outcome, may hinder the rule’s effect.
“The rule is not well thought out. It involves manufacturers' list prices, which are not ‘real’ market prices but the price to pharmacy benefit managers, wholesalers, and other direct purchasers. This price is immediately discounted through rebates and other contractual mechanisms,” Robert A. Freeman, PhD, a professor of pharmacy administration at the University of Maryland’s Eastern Shore campus said.
“Patients don’t benefit from those ‘discounts’ at all. At the point of sale, the patient pays 20% to 25% of the price as coinsurance, meaning that for drugs that cost $100,000 annually, the patient still has to come up with $20,000 or more to get the drug. This puts a terrible financial burden on many patients, some of whom will forgo care as a result or be forced to make decisions about cutting back on food, rent, etc.,” he continued.
The HHS has not indicated the specific number of patients who pay list price but has provided some indication of which cohorts the rule most affects. These patients include the 47% of Americans who have high-deductible health insurance plans that pay the list price of a drug until they have reached their deductible and all seniors on Medicare Part D have coinsurance for certain types of drugs, which means their out-of-pocket expenses are calculated as a share of list price.
Data from The Commonwealth Fund’s Biennial Health Insurance Surveys indicate that 24% of low-income adults reported not taking a prescribed drug because of the cost in 2016, suggesting that if the rule fails to produce significant results for patients, there could be larger consequences beyond medication costs.
Zabawa pointed out another potential repercussion of the rule that could be harmful.
“Lowering drug prices is an important goal, but we must do a better job of objectively educating our residents about all the levers that make our health system operate the way it does, and that includes both good and bad aspects of our system,” she said.
“If we force drug companies to lower their prices, what, if anything, will happen to drug research and development? These messages are important for consumers to hear from objective, nonpartisan sources, not from TV ads,” Zabawa continued.
Support for rule
The exact number of drugs that are affected by the rule applies to is uncertain. One expert said it could be as few as 50 drugs, another said it could be hundreds. There was, however, consensus among the AMA, ACP and American Academy of Family Physicians that the rule is a good idea.
“The Trump administration has taken a step in the right direction. “This small dose of transparency will help patients have a more complete picture when faced with prescription drug ads,” Barbara L. McAneny, MD, AMA president, said in a statement.
“Patients — especially those who pay a drug’s list price or whose cost sharing is based on the list price — will now have another tool in their toolbox as they work with their physicians to determine their prescription drug regimens. That’s a notable change,” she continued.
“The ACP is encouraged by the final rule ... [and] believes that this is a promising step in improving transparency in prescription drug pricing,” Robert McLean, MD, ACP president said in a statement, while then-AAFP president Michael Munger, MD, prior to Azar’s announcement of the final rule, had written the HHS Secretary to indicate the AAFP “wholeheartedly supports the policy objective of ensuring beneficiaries are provided with relevant information about the costs of prescription drugs and biological products.”
C. Michael White, PharmD, a practicing pharmacist and professor at the University of Connecticut School of Pharmacy, told Healio Primary Care this rule can serve as a teaching moment for patients and prescribers.
“The first time a patient hears that the drug costs $1,800 shouldn’t be at the pharmacy counter. Even for the patient with insurance who only has to pay a low fixed copay, the disclosure of the list price is educational to patients wondering why their health plan premiums are rising so quickly,” he said.
White further explained why he thought the initiative would be, as he described it, “moderately successful.”
“Some patients will be swayed to ask about alternatives if they know the price is high and prescribers seeing the same ads will also be more aware of the price,” he said.
Potential roadblocks to implementation
Freeman and White suggested the drug companies may not let the rule take effect without some sort of challenge or change.
“The [drug] companies are exploring ways to minimize the visibility of the price information or to add context. If this final rule is successful in curtailing the profitability of this advertising, the companies will move on the other ways to enhance market share or profitability,” White said.
“There are some who think the rule is a violation of corporate free speech. Therefore, I expect at least one or more companies will litigate against the new rule,” Freeman noted.
Even if the rule does go into effect as intended in July, data suggest that physicians may need to be prompted to begin discussions about medication costs.
Researchers reported in Annals of Internal Medicine that physicians and staff from seven primary care practices in three states participated in a single 60-minute training session that discussed cost-of-medication importance, team-based screening, and cost-saving strategies. Surveys among 700 of these practices’ patients revealed that before the intervention, only 17% of patients had discussed medication costs with their doctor, but after it, the number climbed to 32%.
Freeman said there could be other barriers that hinder the rule’s implementation.
“Follow-up policies are going to be far more difficult to enact via legislation and administrative rule-making because they are far more complex. In addition, the lack of a consensus between Republicans and Democrats on the details makes it highly doubtful if legislation or more administrative rulemaking could occur before the 2020 presidential election cycle,” Freeman said.
Others also suggested that meaningful change to drug prices might not happen until after the next presidential election year.
“I truly think nothing effective will be done before 2020. After the elections, you might have some meaningful reform, whether it be Medicare negotiations, or extension of Medicaid rebates,” Diriker said.
The complexity of drug pricing in the United States further minimizes the impact the price disclosure rule will have, he added.
“These drug pricing programs are a mess, and there are a lot of problems with them. Putting drug prices in ads does not address the main issue that a large percentage of a company’s research and development budget tends to be recovered via the U.S. patient; other countries’ patients get away with paying a cost that is marginal. What the lobbying companies do to patients in the U.S. is maybe unethical, but currently not illegal. High drug prices are not going to change until we change how people are elected,” he said. – by Janel Miller
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Disclosures: None of the sources interviewed for this story report any relevant financial disclosures.