Drug Companies, Scared of Regulation, Inch Toward Price Transparency

"Our vision for a new, more transparent drug-pricing system does not rely on voluntary action," says HHS Secretary Alex Azar.


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Hoping to preempt regulatory efforts to mandate drug price disclosures, the Pharmaceutical Research and Manufacturers of America (PhRMA) announced today new voluntary direct-to-consumer advertising principles.

Specifically, all DTC television advertising by drug companies "that identifies a prescription medicine by name should include direction as to where patients can find information about the cost of the medicine, such as a company-developed website, including the list price and average, estimated or typical patient out-of-pocket costs, or other context about the potential cost of the medicine." In addition, drug companies will also create a new platform to provide patients, caregivers and health care providers with cost and financial assistance information for brand-name medicines. This won't be too terribly different than the status quo, since it is actually already relatively easy to find pricing information for most drugs online.

The big announcement is a clear effort to throw a bone to politicians and bureaucrats hoping to demagogue the drug price issue in coming elections. The Trump administration and members of Congress have been calling on pharmaceutical manufacturers to reveal the prices of their drugs in their television advertising. In August, the Senate passed a bill that would have provided $1 million for the U.S. Department of Health and Human Services (HHS) to devise and issue a regulation requiring price disclosure. If implemented, the Food and Drug Administration would consider drug advertisements without prices as labeling violations.

"The pharmaceutical industry hates this bill and this amendment like the devil hates holy water. They don't want to tell you what it is going to cost," said Sen. Richard J. Durbin (D–Ill.) in a Senate floor speech in favor of the bill. "We are trying our very best to give the American consumers a break and perhaps to start to slow down the cost of prescription drugs."

In September, the House of Representatives refused to pass the Senate bill, thus killing this legislative effort to mandate drug price transparency.

HHS Secretary Alex Azar was unimpressed by PhRMA's announcement. "Our vision for a new, more transparent drug-pricing system does not rely on voluntary action," declared Azar in a statement. "The drug industry remains resistant to providing real transparency around their prices, including the sky-high list prices that many patients pay. So while the pharmaceutical industry's action today is a small step in the right direction, we will go further and continue to implement the President's blueprint to deliver new transparency and put American patients first." HHS is expected to issue new drug price transparency regulations soon.

PhRMA claims to be worried that disclosing the list prices of drugs in their television advertisements would discourage some patients from using medicines that could benefit them and is misleading since most patients don't pay list prices. If HHS does issue regulations mandating price disclosures in DTC ads, the drug companies would likely argue in the federal courts that regulations requiring price disclosures would violate their free speech rights.

Update: HHS Secretary Alex Azar in a speech to the National Academy of Medicine declared that PhRMA's voluntary system is insufficient and that the Trump administration will mandate that list prices be disclosed in all television advertisements for drugs costing more than $35 per month.

"We will not rely on voluntary action to accomplish our goals," said Azar. "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. Patients deserve to know what a given drug could cost when they're being told about the benefits and risks it may have. They deserve to know if the drug company has pushed their prices to abusive levels. And they deserve to know this every time they see a drug advertised to them on TV."