Small Business Insider
A proposed government mandate for advertising won’t lower prices, and will confuse consumers
By Karen Kerrigan–
The issue of price transparency and prescription drugs is getting some attention. The federal government just proposed a new regulation mandating that pharmaceutical companies include list prices in their direct-to-consumer (DTC) television advertisements. If you are thinking or asking, “Wait. Didn’t that bad and meaningless idea just die in the U.S. Senate as part of some government funding package?” The answer is yes. It was an amendment that a broad coalition, including SBE Council, opposed on many grounds. Our common sense rationale prevailed, and with good reason. There are far better solutions to drug price transparency than government mandates and meddling that could lead to unintended consequences.
On the same day, but just prior to the announcement made by the Department of Health and Human Services (HHS) about its proposed DTC mandate, the pharmaceutical industry unveiled a new transparency project. The contrast between the two approaches is quite evident as PhRMA’s strategy would provide meaningful and relevant information to consumers about drug prices. Far more so than a government mandate requiring the dropping of a drug’s list-price (the Wholesale Acquisition Cost) in a thirty or sixty second television spot.
That’s not just my opinion, the public thinks so too (more on this later.)
As SBE Council argued in a letter to the U.S. Senate regarding the downside and delusion of mandating DTC prices in advertisements, “this government mandate to bring consumers list-price data will only confuse consumers because it is not relevant to what they pay given health insurance coverage, discounts and other programs.”
Among other drawbacks, compelling the disclosure of list prices by the government is also fraught with First Amendment problems. So again, and thankfully, the Senate did not take action on the amendment that would have funded such a mandate. Still, HHS remains undeterred.
As announced by HHS Secretary Alex Azar in an October 15 speech outlining the proposed mandate:
“We are proposing to require American drug companies, for the first time ever, to include in their TV advertising the list price of any drug paid for by Medicare or Medicaid.”
But will consumers can get meaningful and relevant price information from these ads?
A Morning Consult survey found that meaningful information with context is what consumers really want. They want more informational resources and perspective regarding costs so they can make better decisions. They want to know how much they will actually pay at the drugstore. They are also very concerned that list-price only ads could sow confusion and dissuade people from getting the medicine they need because they may perceive the list-price as unaffordable.
PhRMA member companies’ voluntary approach take these concerns into account. According to the press release outlining the details:
“PhRMA member companies’ direct-to-consumer (DTC) television advertisements will soon direct patients to information about medicine costs, including the list price of the medicine, out-of-pocket costs or other context about the potential cost of the medicine and available financial assistance.”
An online platform will also be developed that provides this information. (You can read the “Guiding Principles on Direct-to-Consumer Advertisements About Prescription Medicines” here.)
The public is strongly in favor of this inclusive and contextual approach. The same Morning Consult survey found this “fuller” approach is preferred by a 3:1 margin (61 percent to 23 percent) to list-price only advertisements.
Obviously SBE Council gets very concerned about government mandates imposed on an entire industry. The biopharmaceutical industry is no exception. It is driven by small, innovative firms.
Among pharmaceutical and medicine manufacturing firms, 57 percent have less than 20 workers, 79 percent less than 100 employees, and 91 percent less than 500 workers. This critical industry is about these small, entrepreneurial businesses that innovate, compete with larger firms and bring life-saving drugs to the market. In the end, government mandates end up hurting small firms the most, which in the end hurts consumers and the quality of our nation’s health care system.
Oftentimes with regulation, the government thinks it knows what consumers want or need and takes a poorly thought-out approach that ends up doing more harm than good. In the case of mandating DTC list-prices in TV ads, what is the benefit of confusing consumers with “prices” that may not be relevant?
Does HHS have the authority to impose such a mandate? Congress has not given HHS this authority, but they argue that because they have the authority to manage Medicare and Medicaid efficiently this gives them the leeway to pursue the proposed course of action. I anticipate that the issue of authority will eventually be challenged.
Finally, the whole point of the proposed mandate is to lower drug prices. In reading the proposal, I don’t see how this mandate will accomplish that goal. I have yet to talk to anyone, or find an opinion anywhere (outside of HHS materials) that points to how this will happen.
Transparency is a very good thing. With technology, consumers are getting more information that is useful, and the specific type of information they need. The transparency strategy announced by PhRMA should be one the government embraces, as opposed to mandating actions that check-a-box in the name of transparency and have outcomes that do not meet their intended goals.