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DTC Drug Price Transparency: Ball’s in Congress’ Court

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Last week, Senators Durbin (D - Illinois) and Grassley (R - Iowa) attempted to advance the Drug-Price Transparency in Communications Act through unanimous consent, but objections from Senator Toomey (R- Pennsylvania) scuttled the plan to expedite passage of the bill. A traditional roll call vote, rather than unanimous consent, may be the next step in this bill’s journey to possible passage.

The bill would amend the Social Security Act to require that direct-to-consumer (DTC) television advertisements include “truthful and non-misleading pricing information.”

This follows a lengthy failed attempt on the part of the Trump Administration to compel drug manufacturers to include list prices of drugs in DTC advertisements on television.

In May 2018, Secretary of Health and Human Services (HHS) Alex Azar announced the so-called HHS Blueprint to lower drug prices and reduce patients’ out-of-pocket costs. One of the more controversial initiatives was a proposed rule that would force drug makers to reveal wholesale acquisition cost or list prices of drugs advertised on television.

In May 2019, HHS finalized its rule compelling drug manufacturers to disclose drug prices in direct-to-consumer (DTC) advertisements.

On one hand, it is argued that the prescription drug market would benefit from more transparency. While not a panacea for improving the pharmaceutical marketplace or lowering list prices of drug, it’s something largely missing in this market. Opacity doesn’t augur well for a competitive market.

However, commenters on the rule have raised a number of objections, including the potential for confusion among patients (who, if insured, typically do not pay the list price), the Food and Drug Administration’s lack of statutory authority to regulate drug prices or compel pricing disclosures, and concerns that the proposal violates the First Amendment.

There’s also the less contentious issue of its relative importance in the transparency debate. How much impact would DTC price disclosure have? DTC pricing is clearly not the most important component in the drug price transparency puzzle. Other, more impactful components include rebates and the practice of spread pricing or the difference in the amount pharmacy benefit managers reimburse pharmacies and the amount paid to them by health plans.

Then, there are the other healthcare sectors with a much larger share of the healthcare pie than pharmaceuticals and higher annual cost growth rates in net spending. These sectors are not immune to transparency concerns. Illustrative of this problem are hospital pricing practices, as well as surprise billing.

In July of this year, just before the required disclosure of drug prices in DTC advertisements was to go into effect, a federal judge struck down the rule. The judge wrote:

“[The] policy very well could be an effective tool in halting the rising cost of prescription drugs. But no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized.”

Prior to the judge’s ruling HHS acknowledged that Congress had not explicitly provided it with the authority to force drug price disclosures in advertisements, but at the same time stated there was an unequivocal connection between the proposed rule on price disclosure and the Social Security Act’s requirement to run Medicaid and Medicare as efficiently as possible. Presumably, HHS believes more transparency would facilitate the efficiency of the government programs.

In light of the judge’s decision, if drug price disclosures in television advertisements are ever to become a reality, Congress would have to step in to legislate such a measure. It appears Congress may be ready to do so, as evidenced by Senators Durbin and Grassley’s recent renewed attempt to push for legislation.

In the current climate in which constituents are clamoring for Congress to do something about drug prices, there may be impetus to advance drug price disclosure legislation.

This would represent a round-about way of addressing drug prices, and in particular patient out-of-pocket costs. DTC price disclosure wouldn’t have nearly the impact of systematic rebate reform where the goal would be to pass through all cost savings generated by rebates to patients. But, history shows it’s much easier for Congress to pass incremental measures, however indirect and minimal their impact, rather than broad, comprehensive ones.

Ultimately, adopting a piecemeal, silo mentality that singles out the transparency of pharmaceutical prices to the exclusion of other sectors is not likely to be an effective way of combating the rise in healthcare costs and patient out-of-pocket spending.

It behooves Congress to treat transparency holistically as a problem that pervades the entire healthcare space, not just pharmaceuticals.



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