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Industry, experts skeptical of proposed drug pricing transparency rule

FILE- In this July 10, 2018, file photo bottles of medicine ride on a belt at the Express Scripts mail-in pharmacy warehouse in Florence, N.J. (AP Photo/Julio Cortez, File)

Consumers may soon be able to learn more about the cost of prescription drugs before buying them, but experts and affordable drug advocates fear publicizing the price of medication will do little to bring that price down.

Health and Human Services Secretary Alex Azar announced Monday the Trump administration is proposing a regulation that would require drug companies to include the price of their products in direct-to-consumer television ads. Manufacturers have long opposed such a measure, which they warn could be unhelpful or even counterproductive for shoppers.

Under the proposed rule, any television ad for a drug covered by Medicare and Medicaid that costs more than $35 per month would be required to disclose the medication’s wholesale acquisition cost on the screen in legible text. Companies that violate the mandate would be listed as non-compliant on a website, and HHS officials said legal action against them would also be an option.

“Patients deserve to know what a drug may cost…,” Azar said in a speech at the National Academy of Medicine. “They deserve to know this every single time they see a drug advertised to them on TV.”

Hours before Azar’s speech, the pharmaceutical industry preemptively unveiled its counter-proposal. All current members of the Pharmaceutical Research and Manufacturers of America have committed to adding information directing consumers to details on prices in their television ads by April 15, 2019.

This could include the list price, out-of-pocket costs, or “other context about the potential cost of the medicine” that manufacturers claim would be more useful than providing just the list price. However, exactly what pricing details to disclose would be up to each company, which could make comparing costs difficult.

PhRMA also announced a partnership with consumer, patient, pharmacist, and provider groups to develop a “patient affordability platform” that would offer search tools and resources to learn about costs and navigate insurance coverage.

“Our member companies are taking a new approach to how they communicate about medicines in DTC television advertisements to make it easier for patients to access information about medicine costs,” Stephen Ubl, president and chief executive officer of PhRMA, said in a statement. “The Administration and Congress have called on our industry to provide cost information in DTC advertisements, and our members are voluntarily stepping up to the plate.”

Azar dismissed the industry’s plan Monday, saying, “We appreciate their effort, but placing information on a website is not the same as putting it in an ad.”

Health care policy experts are unconvinced either approach to providing more up-front pricing transparency will have much immediate impact.

“Both proposals basically aren’t going to work if what we want is consumerism in the health care industry,” said Joe Antos, a resident scholar at the American Enterprise Institute.

List prices have limited value for patients, most of whom have some of their drug costs covered by insurers or the government. One reason drug-makers object to the HHS proposal is that the price that appears in the ads would rarely be the amount consumers are charged, potentially causing confusion or even discouraging them from seeking medical care.

Azar acknowledged this, but he maintained those without insurance or with high-deductible plans do sometimes face these prices. Co-pays are also often based on a percentage of the actual cost.

Antos noted that price comparisons are easy for over-the-counter drugs, and shoppers can weigh the costs of brand name and store brand medication. The way the prescription drug market currently works, that approach is difficult to replicate, and advertising list prices is unlikely to change that.

“In a normal market, clearly people do shop at least partly on the basis of price,” he said. “In health care, because there’s a third-party who’s paying… people are not as aware of the price of anything. On top of that, because of the complex way all medical services are covered, it’s very hard to tell what the real price is.”

According to Ben Wakana, executive director of Patients for Affordable Drugs, requiring prices in ads is a welcome step, but it is not one that will affect health care costs. Instead, the organization supports eliminating tax deductions drug companies take for their ads.

“There is no evidence that providing patients and consumers access to list prices will result in lower prices for prescription drugs. The focus on price disclosure is a distraction from additional action that would benefit people –– lowering prices,” Wakana said in a memo.

Gabriel Levitt, founder and president of Prescription Justice, said consumers do shop around for the lowest price on generic prescription drugs when they can, but their options are limited when a drug is still under patent, as many of the most expensive ones are. When one company has a monopoly on a drug, knowing the price does not do much good.

“To some extent this is a dog and pony show where the Trump administration gets to pretend it’s doing something about high drug prices, and Big Pharma whines about it as part of the drama,” Levitt said.

Others are more optimistic about the Trump administration’s proposal.

“Today, the Trump Administration made real progress toward ensuring consumers have the information they need to make the health care decisions that are best for them,” the Campaign for Sustainable Rx Pricing said in a statement. “Consumers have the right to know how much medicines cost, and providing drug pricing in advertisements will do just that. We must build off this and accelerate efforts to ensure affordable drug prices for American patients.”

Matt Eyles, president and CEO of America’s Health Insurance Plans, called the plan a “bold” effort to address one of the most meaningful ways to reduce drug prices and empower consumers.

Sens. Chuck Grassley, R-Iowa, and Dick Durbin, D-Ill., who co-sponsored legislation that would have imposed similar requirements, both applauded Azar’s announcement.

“Making drug prices available to consumers is a commonsense way to lower prices. No one buys a gallon of milk without knowing the price. Why should prescription drugs be any different? This announcement follows my bipartisan work with Senator Durbin to support the Administration in advancing such policy in recent legislation,” Grassley said in a statement.

Whether it decreases health care costs or not, polls show Americans generally want drug-makers to disclose prices. A July Politico/Harvard University poll indicated 63 percent of Americans favor requiring drug ads to include pricing information, but only about a quarter of them think it would lead to lower prices.

According to a Kaiser Family Foundation poll conducted earlier this year, 80 percent of Americans believe prescription drug costs are “unreasonable,” and similar majorities say Republicans, Democrats, and President Trump are not doing enough about it. More than 70 percent of respondents said the drug industry has too much influence in Washington, ranking its excessive influence higher than that of Wall Street and health insurance companies.

“If drug ads clearly disclose list prices, then the American people, who are already fed up with high drug prices, will become even more outraged,” Levitt said. “That outrage could then lead to real actions to reduce drug prices.”

The pharmaceutical industry has polling of its own. A Morning Consult poll commissioned by PhRMA found 61 percent of Americans would prefer that ads direct them to further information on pricing, while 23 percent favor having the list price revealed in the ads.

Wakana dismissed that survey as “laughably skewed.”

“The lobby group’s claim that voters prefer more information to less information is obvious, but it’s based on a false choice. PhRMA should have asked if voters prefer more information or lower prices,” he said.

The release of the HHS proposal starts the clock on a 60-day public comment period, and PhRMA is already threatening legal action that could delay its implementation further.

"The concern is that if the government is compelling companies to speak than that violates the First Amendment," PhRMA general counsel James Stansel said on a press call Monday, according to Politico.

The Supreme Court has upheld requirements for companies to disclose information to consumers in television ads in the past, but Antos observed the structure of the proposed rule does not project confidence.

“What’s sort of puzzling here is the FDA is the body that regulates the content of the ads in terms of side effects and warnings,” he said. The fact that this policy would be administered by the Centers for Medicare and Medicaid Services instead and would only apply to drugs covered by Medicare and Medicaid suggests administration lawyers are unsure of their legal authority to do this, he added.

Azar argued this is no different from regulations that have been in place for decades requiring automakers to reveal list prices in car commercials, even though consumers rarely pay the list price.

“Despite the precedent for this common-sense measure, the pharmaceutical industry has resisted it fiercely,” he said, adding, “President Trump is undeterred.”

The proposal is one of the most aggressive steps the Trump administration has taken since releasing its blueprint for lower drug prices in May. Other significant measures HHS has implemented under President Trump include streamlining the approval process for generic drugs and biosimilars, which Azar observed has led to record numbers of generics being approved in 2017 and again in 2018.

“Ultimately, what we really need is competition at the product level, and we’ve seen that work,” Antos said.

Levitt observed some competition-increasing measures President Trump has backed in the past are absent from his current blueprint.

“Trump seems to have abandoned his campaign positions to allow importation of lower-cost medicines and Medicare to negotiate drug prices. Now, those policies would bring drug prices way down,” he said.

HHS is soliciting comments on whether the final rule should apply more widely and what the requirements for the on-screen pricing notification will be, but the proposed rule would not mandate that the price be said out loud. How much attention audiences would actually pay to the price statement is an open question, but Antos expects many will just tune it out.

“This falls into the same category as that mumbled stream of side effects that is now required,” he said. “This will be part of the noise people don’t listen to anymore.”

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