Listing drug prices on TV: Does it really benefit consumers?

Transparency or not transparency? That is the question.

In October of 2018, the Trump administration issued a proposed rule to revise the Federal Health Insurance Programs for the Aged and Disabled. This involves amending the Medicare Parts A, B, C and D programs, as well as the Medicaid program, to require direct-to-consumer (DTC) television advertisements of prescription drugs and biological products for which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or “list price”) of that drug or biological product.

The question here is to what end? What is the goal of this information as it relates to the end consumer (i.e. the patient)?

In today’s insurance world, the responsibility for payment can vary significantly based on the type of benefit structure (benefit design) of the individual and the type of “payer” — an employer sponsored or government sponsored (VA, DoD, Medicaid, Medicare, Exchange) entity. However, in either case, typically once a patient has surpassed a certain co-pay or co-insurance amount, the third-party payer assumes responsibility for the majority of health care costs.

Related: Reference-based pricing: a panacea for high drug prices?

It is hypothesized in the proposed rule that by providing this level of detail, the patient will make a more informed decision that in theory will align information in a way whereby a patient (consumer) will select a more affordable medication. Many struggle with this concept.

Here are some of the questions that arise:

• Will this information be impactful or depend upon what type of health plan is accessed by the patient?
• If the patient has a very attractive plan where they may have an affordable out of pocket amount, will they look to enable access to a more or less expensive product within a given category?
• Will they have an appreciation for the balance of the cost borne by the employer?

On the other hand, if a patient has an expensive, high-deductible plan will the information impact any drug access decision, or will an expensive biologic product be too expense at any price? At least until the patient reaches their deductible, assuming they can afford to reach that limit?

The other side of this argument is that clearly this information can helpful. But it may be more helpful if it is conjunction with a larger counseling effort to help a patient understand the true cost of therapy and potential product options.

If a consumer sees a price on TV for a product that they might be taking, will they also be aware of a) generic alternatives b) other drug options within the therapeutic category that may be of lower price and c) site-of-care options (i.e., home infusion vs. clinic infusion) that may also impact the cost of care that is consumed by that individual patient.

This also does not address the fact that the WAC price a) is not the basis of reimbursement for the retail setting and b) may not be the real “net price” in the market given discounts/rebates and c) may be subject to other utilization and outcomes levers depending on the nature of any Value Based Contract that may be part of the relationship between a given manufacturer and a given payer.

While drug pricing is certainly getting a lot of attention, it would be prudent to remember that drug spending (CY 2017) represents approximately 10 percent of the cost of health care spending in the US. Not insignificant, and certainly worthy of consideration, is the fact that lowering the cost curve in the pharmaceutical arena, while helpful, may not be incredible impactful to the overall cost of health care in the US.

As always it is not a straight path along the health care cost pathway.

Read more:

• New bipartisan bill targets drug prices–and Mylan
• Same old story? Dem leaders in Big Pharma’s pockets
• Quick take: Key themes affecting pharma in 2019

Dean Erhardt is president and CEO of D2 Consulting.