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Drug prices in advertisements: Navigating uncharted waters

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by Jeremy Schafer, PharmD, MBA, SVP, Precision for Value 

When reconciliation of the House and Senate versions of the health bill left the Durbin-Grassley drug price disclosure amendment on the cutting-room floor, there was an assumption that drug pricing in DTC may not occur in the near future. However, the Trump administration took an alternate route with CMS announcing proposed rule CMS-4187. In brief, the rule would require manufacturers of pharmaceuticals and biologic drugs to communicate the list price, or wholesale acquisition cost (WAC), for a typical month of therapy. The rule would apply to any medication that is eligible for Medicare or Medicaid (which is essentially all drugs) that is at least $35 per month. The disclosure statement is to be displayed during the ad and worded as follows: “The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.” The rule is under a 60-day comment period, after which it may go into effect. For pharmaceutical manufacturers, the communication of price will create numerous challenges.

Drug pricing in the United States is convoluted with a mixture of discounts, third parties, and financial programs. A drug starts with a WAC price but there are discounts to distributors and pharmacies as well as rebates to health plans and/or pharmacy benefit managers. Patients often carry a copay or a coinsurance dependent on their benefit of which thousands are in place across the myriad of insurance providers. But patients may pay less than the copay or coinsurance because of foundation support or manufacturer patient assistance programs. In short, the one price manufacturers will need to communicate, the list price, is probably the only price that is never really paid. However, communicating this complex issue is far too onerous for a 30-second TV spot already crammed full of safety warnings and efficacy claims. The proposed rule’s wording of the disclosure will soften the blow somewhat but pharmaceutical manufacturers will need to be prepared to explain the complexities of pricing to more stakeholders than before.

Rationalizing drug price to patients and the general public previously shielded from such information will be particularly challenging. Drug commercials often feature suffering patients, possibly with life-threatening conditions, and how their lives are changed by medication. However, the uplift of seeing a cancer patient being treated with a new therapy may be dampened when words flash on the screen indicating one month of therapy costs north of $10,000. Patients who might not be able to afford this medication—or someone not affected by the condition but affected by rising healthcare costs—may be disturbed. Education will be needed. Manufacturers could consider separate messaging either DTC or via other means to help the public understand the reason for a drug’s price, including investment in R&D.

Another complication in rationalizing the price arises when the price goes up. The proposed rule states that manufacturers will need to communicate the most up-to-date price, meaning that when the annual (or more frequent) price increase occurs, astute DTC viewers may notice the price has changed. Pharmaceuticals, unlike most other products in the world, tend to go up in list price, not down, over time. Patients and their families, already facing increased premiums and cost share, may be incensed at the progressive increase in price for something they feel hasn’t changed. Manufacturers will need to communicate to a broader audience the rationale for a price and why the price changes. Pointing to new innovations—“an increase in cost of drug X made research into miracle cure Y possible”—is one potential avenue.

The final rule, if implemented, will create a daunting challenge to pharmaceutical manufacturers, who are unlikely to give up on DTC entirely. DTC serves benefits in educating patients on new treatment options and helps empower them to discuss their condition with their provider. Discontinuing DTC would only serve to temporarily lessen transparency in a healthcare market surging toward more disclosure. Instead, manufacturers should focus on how to tell their story in ways that patients and the general public can understand and appreciate. Pharmaceuticals have made some cancers curable, heart attacks preventable, pain manageable, and organ transplant possible. Manufacturers have a new opportunity to show how their work has changed lives for the better on both an individual and a population level. For a convinced audience, that may be worth the price.

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