Trump administration, pharma exchange verbal volleys on drug-price transparency

Reviewed by James Ives, M.Psych. (Editor)Oct 16 2018

The Trump administration and drugmakers are squaring off over a proposal to show drug prices in television ads.

"Putting list prices in isolation in the advertisements themselves would be misleading or confusing," argued Stephen Ubl, CEO of the Pharmaceutical Researchers and Manufacturers of America, known as PhRMA, the major trade group for branded drugs.

Ubl issued his statement hours before Health and Human Services Secretary Alex Azar was scheduled to speak about drug prices and what the Trump administration plans to do to lower them. He went on the offensive, questioning the legality and practicality of showing list prices of drugs in TV ads.

Instead, Ubl, whose trade group represents the largest pharmaceutical manufacturers on the globe, promised that pharma companies would direct consumers to websites that include a drug's list price and estimates of what people can expect to pay, which can vary widely depending on coverage.

Drug manufacturers will voluntarily opt in to this disclosure starting next spring, he said.

Within an hour of PhRMA's announcement, Azar fired back with a statement of his own, characterizing PhRMA's strategy as still "resistant to providing real transparency around their prices" but a "small step in the right direction."

He promised the White House "will go further" in requiring drug price transparency. Its proposal comes weeks before midterm elections, in which health care is a top voter concern. Polling from the Kaiser Family Foundation suggests most voters support forcing price transparency in drug advertisements. (Kaiser Health News is an editorially independent program of the Foundation.)

The White House's plan for direct-to-consumer advertising, which was teased in President Donald Trump's blueprint this summer, has won praise from insurance groups and the American Medical Association. Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) also proposed the plan in the Senate last month, but it failed to garner enough support. Experts pointed out a host of complications, suggesting that neither PhRMA's approach nor the White House's would fully explain to consumers what they'll actually pay for drugs.

That's because a drug's list price — the metric HHS wants to emphasize — often bears little relationship to what a patient actually pays at the drugstore. Insurance plans and pharmacy benefit managers often negotiate prices that are below the list price. Some patients qualify for other discounts. And often patients pay only what their copay or deductible require at any given time.

Other consumers could be stuck paying the full price tag, depending on how their insurance plan is designed, or if they don't have coverage.

"The system is very opaque, very complicated and, importantly, there isn't a huge relationship between list prices for drugs and what patients will expect to pay out-of-pocket," said Adrienne Faerber, a lecturer at the Dartmouth Institute for Health Policy and Clinical Practice who researches drug marketing.

But the industry's strategy, she said, also appeared lacking.

Under PhRMA's plan, drugmakers would not standardize how they display their information. Where consumers go could vary on Pfizer's website versus Merck's to learn about the list price and the range of out-of-pocket costs. That, Faerber argued, would make it difficult for people to unearth relevant information.

PhRMA also announced it is partnering with patient advocacy groups to create a "patient affordability platform," which could help patients search for costs and insurance coverage options.

Ubl cast their proposal as a way to address more effectively the government and public concern about drug price transparency.

Pharmaceutical manufacturers rely heavily on national advertising and now represent the third-highest spender in national television advertising, according to Michael Leszega, a manager of market intelligence at consulting firm Magna.

At certain times of day, pharmaceutical ads make up more than 40 percent of TV advertisements. And those commercials stand out  because they are generally longer, with their long list of side effects and warnings the pharmaceutical industry must tag on at the end.

Those disclaimers highlight another challenge for the administration: legal action.

There is a body of Supreme Court decisions that dictates how disclaimers and disclosures can be required, said constitutional law expert Robert Corn-Revere. He filed a "friend of the court" brief in a 2011 U.S. Supreme Court case related to commercial speech and the pharmaceutical industry.

Generally, the administration's requirement must meet the standards of being purely factual, noncontroversial and not burdensome, Corn-Revere said.

On the question of whether requiring drug prices be listed in advertising violates the First Amendment's free-speech guarantee, Corn-Revere said it "all comes down to the specifics."

Ubl, when asked Monday morning about a potential lawsuit, didn't rule out the possibility. "We believe there are substantial statutory and constitutional principles that arise” from requiring list-price disclosure, Ubl said, adding: "We do have concerns about that approach."

KHN's coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.