Drug Prices in DTC Ads… Helpful or Not?

Donna Kerney Correia, PhD Healthcare Industry

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In May 2018, President Trump and Health and Human Services Secretary Alex Azar introduced the American Patients First Blueprint as part of the Administration’s efforts to reduce the prices of prescription drugs and out-of-pocket costs for patients. To achieve these goals, four overarching strategies are outlined in the document:

  • Increasing competition
  • Improving negotiation
  • Creating incentives for lower list prices
  • Lowering out-of-pocket costs

Each area has its own set of tactics under consideration to achieve the goals. Of particular interest here are the incentives for lowering list prices.

One of the proposals put forth to achieve this goal is to include the list price for a drug in the advertisement. As HHS Secretary Azar said, “If we want to have a real market for drugs, why not have [companies] disclose their prices in the ads, too? Consumers would have much more balanced information, and companies would have a very different set of incentives for setting their prices.” To that end, Senators Richard Durbin (D-IL) and Chuck Grassley (R-IA) proposed an amendment that would require prescription drug advertisements to include prices. They were hoping “to give the American people more information about drug costs. More information gives transparency to the transaction, and will help give American consumers a break and start to slow down the skyrocketing cost of prescription drugs.”

But will it?

Does list price matter to the consumer?

Well, sort of, in some markets. Let’s look at car commercials. In addition to touting the many benefits of the car – powerful engines, high safety standards, premium sound systems, leather interiors, etc – these commercials typically end with “starting at $$$”, reflecting the MSRP (manufacturer’s suggested retail price) for the car. But, “Nobody pays list price.” So does it matter? At the very least, the MSRP may give the consumer a starting point for negotiating the best deal. The sticker price also details the price for each component, giving consumers additional information to help in their decision making process. The consumer will pay the price he/she negotiates. That is not the case for prescription drugs.

Prices for drugs are negotiated via somewhat complex, behind the scenes methods between manufacturers, health plans, physician groups, PBMs, government entities, pharmacies, distributors, and others. The final price paid by a patient at the pharmacy or reimbursed to a hospital system is the result of these various financial transactions and negotiations. And for the patient at the pharmacy, the out-of-pocket spend is also dependent on his/her insurer and plan design for drug coverage. Patients can’t negotiate with the pharmacy like they can with the car dealership. The list price on a drug ad doesn’t mean anything to the patient. What matters is what that individual will pay once he/she goes to the pharmacy counter. That’s where the decision is made to fill or not fill the prescription.

So can list prices in drugs ads have any impact?

The concern of some is that the list price in the ad could deter individuals from filling their prescriptions if they perceive the price in the ad to be expensive – even though that price likely doesn’t reflect the direct cost to them. Maybe list prices aren’t used, but rather the negotiated price that includes rebates and discounts. But those can vary as well. Regardless of what the final ruling states in terms of which price is shown, education about what those prices mean will be important. Avoiding, or at the very least, mitigating, any confusion for the consumer should be a priority.

One of the hopes of including prices in drug ads is to encourage lower list prices. The government is calling for more transparency in drug pricing. This may be just one of many efforts to try to make that happen.

While efforts to encourage greater transparency may be applauded, questions remain regarding whether prices in drug ads will bring clarity or confusion and whether they will result in lower drug prices. What say you?

Viking Healthcare Solutions has established itself as the premier provider of corporate account services and strategic planning support for the pharmaceutical and biotech industries. VHS Insights, our research division, specializing in payer profiling, market research and analytics, can help you find answers to inform your payer strategy. We support traditional and rare/specialty organizations to create, maintain, defend, and protect access to your product throughout its lifecycle. Bank on our experience to help you achieve successful product commercialization. Contact us at http://www.vikinghcs.com/connect.

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