18 Feb Implications of Pharmaceutical Price Transparency in Television Advertising
In May of 2018, the Trump administration released a proposal which it described as a blueprint to address rising pharmaceutical costs. The proposal, American Patients First, consisted of four key strategies for reform (you can read the full Jupiter assessment here) including an effort to create incentives for lower list prices. Part of the strategy to incentivize lower list price was centered around creating greater consumer awareness of pharmaceutical prices and to do so by requiring manufacturers to include list price in direct to consumer pharmaceutical advertising (DTCPA). In October of 2018, HHS proposed a regulation that would require list prices to be included in DTCPA similar to potential side effects are listed today1.
The comment period for the proposed rule expired in December of 2018 and CMS is currently deliberating on its potential implementation, but a recent article published in JAMA has renewed debate around the merits of price transparency in DTCPA. In the study, researchers took a look at how including list prices in DTCPA, as proposed by HHS, might impact consumer behavior2. Perhaps unsurprisingly, the authors found that disclosing the price of “high priced” drugs substantially decreased consumer interest in inquiring about and ultimately taking the drug. However, this decrease was mitigated when the advertisement included language which explained that much, or all of the cost could be covered by insurance.
The study’s findings highlight a key point of contention in the debate surrounding price transparency in the pharmaceutical market—much like the sticker price of a car, the list price of a drug is not what anyone actually pays. Accordingly, criticism from both sides of the debate has focused on the relevance of list prices to the consumer; opponents of list price transparency in DTCPA argue that the list price is not what the patient ultimately pays and only creates confusion while advocates contend that the list price is at least representative of what some patients pay3. What appears to be overlooked in the discussion is the concept of value and its relationship to price. While the pharmaceutical prices are certainly opaque and incentives are often misaligned with controlling costs and optimizing care, consumers are unlikely to benefit from price transparency in DTCPA due to their inability to accurately assess the value of a given drug in relation to its price.
The premise of price transparency as a cost control mechanism relies on the consumer’s ability to make an informed selection by assessing the value of a variety of available options. However, in the healthcare market, the consumer is typically ill-equipped to make an informed decision and furthermore, may lack options from which to choose. The JAMA study findings indicate that knowledge of a high list price might deter patients from taking medication that could ultimately improve their health and potentially result in lower costs to both the patient and the healthcare system4,5. Alternatively, in many rare disease indications, there is only one FDA approved therapy. In such cases the only real choice a patient might have is between the single approved therapy or no therapy at all; price transparency is of little help.
While the pharmaceutical market as a whole would benefit from greater price transparency, including list prices in DTCPA is an ineffective tactic to curb rising healthcare costs. A far more productive approach is to focus on aligning pharmaceutical prices with the value they deliver to patients and to the healthcare system. From evidence-based frameworks like ICER’s Value Assessment Framework to outcomes-based contracting, there are a variety of methods under development to align pharmaceutical price and value. Manufacturers should take this as an opportunity to become a partner in ensuring their products deliver on the value promised or we will continue to see well-intentioned but ineffective proposals like including list prices in DTCPA.
- Department of Health and Human Services. (2018, October 15). What You Need to Know about Putting Drug Prices in TV Ads. Retrieved from https://www.hhs.gov/about/news/2018/10/15/what-you-need-to-know-about-putting-drug-prices-in-tv-ads.html
- Garrett, J. B., Tayler, W. B., Bai, G., Socal, M. P., Trujillo, A. J., & Anderson, G. F. (2019). Consumer Responses to Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. JAMA Internal Medicine. doi:10.1001/jamainternmed.2018.5976
- Azar, A. (2019 January 9) @SecAzar Retrieved from And for those who continue to repeat that list prices don’t matter, let’s remember: Anyone who hasn’t spent through their deductible or has coinsurance is paying all or a percentage of the list price of the drugs they need. List prices matter. https://twitter.com/SecAzar/status/1083033986048450562
- Congressional Budget Office (2012). Offsetting effects of prescription drug use on Medicare’s spending for medical services. Congressional Budget Office Report, Retrieved at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43741-MedicalOffsets-11-29-12.pdf
- Roebuck, M. C., Liberman, J. N., Gemmill-Toyama, M., & Brennan, T. A. (2011). Medication Adherence Leads To Lower Health Care Use And Costs Despite Increased Drug Spending. Health Affairs, 30(1), 91-99. doi:10.1377/hlthaff.2009.1087