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CMS Proposes Drug Price Transparency in Ads Amidst Pharma Pushback

Competing proposals for price transparency in advertisements are causing tension throughout the healthcare industry.

drug price transparency

Source: Thinkstock

By Sara Heath

- A CMS proposal could require drug manufacturers to offer full price transparency in direct-to-consumer advertisements, a move that could be met with legal pushback from the nation’s pharmaceutical trade groups.

The CMS proposal calls for all pharmaceutical companies to disclose the Wholesale Acquisition Cost (WAC) price for drugs in their DTC advertisements. The policy would only pertain to drugs covered by Medicare or Medicaid.

This move is a part of CMS and HHS efforts to put more control in the hands of the patient. Additionally, this heightened price transparency should lead to the lowering of drug costs, according to HHS Secretary Alex Azar.

“This historic proposal is an important way to create new incentives for drug companies to start lowering their list prices, rather than raising them,” Azar said in a public statement. “President Trump’s drug-pricing blueprint called for HHS to consider how to accomplish this goal, and now we are following through on this measure to better inform patients, help them lower their drug costs, and reduce unreasonable spending in Medicare and Medicaid.”

Under the proposed rule, drug manufacturers would need to disclose costs for a typical dose of acute treatments such as antibiotics, or for a thirty-day prescription for drugs used in chronic care management plans. Drugs costing less than $35 would be exempt from the rule.

READ MORE: How Patient Experience in Billing Offices Impacts Patient Payments

Adding this level of price transparency should allow patients to make more informed choices about the medications they purchase, CMS said. High drug costs are known to be crippling for many patients, but price transparency could help patients with their healthcare budgets or nudge patients toward a low-cost alternative.

The Administration has considered the idea of DTC ad price transparency before. Earlier this year, the Senate voted to approve DTC ad price transparency as a part of this past summer’s “minibus” spending package.

However, although the bill was met with bipartisan praise, pharmaceutical industry professionals lambasted the proposed legislation. Disclosing a list price for a drug within an advertisement could amount to providing patients with the wrong information, trade groups argued. Rarely do patients pay the actual list price of a medication, and advertising that cost could cause undue distress and confusion.

Eventually, the price transparency provisions were removed from the final bill.

Prior to CMS announcing this most recent price transparency and DTC advertising proposals, leading industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) updated its DTC ad policies to create some level of price transparency.

READ MORE: Patient Advocates Call for Drug Price Transparency in HHS Blueprint

Specifically, PhRMA amended its Guiding Principles on Direct-to-Consumer Advertisements About Prescription Medicines to give patients the tools to find out drug costs. The added provisions state:

“All DTC television advertising that identifies a 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.”

These provisions do not go as far as the HHS regulations.

The PhRMA version of price transparency does not actually require drug companies to disclose list prices in ads; instead, they require companies to provide information for patients to access drug prices on their own. Drug companies may also choose what prices they disclose online.

For example, a single medication could have different recommended doses. The drug company may choose to disclose prices for one of those dose recommendations or all of them.

READ MORE: Proposed Drug Price Changes to Increase Patient Out-of-Pocket Costs

Additionally, the PhRMA guidelines only apply to member companies, and the guidelines are voluntary, PhRMA said.

Should HHS press on with its provisions, PhRMA alluded to potential legal actions, chief among them a case regarding First Amendment free speech rights on behalf of drug manufacturers.

“PhRMA remains concerned that just including list prices in these advertisements is not sufficient and could discourage patients from seeking needed medical care,” the group said in a statement. “List prices are not a good indicator of what a patient will pay at the pharmacy counter and do not reflect the substantial discounts and rebates negotiated by insurers and pharmacy benefit managers. In addition, any such requirement would raise significant legal issues, including First Amendment concerns.”

PhRMA’s announcement does not go far enough, according to HHS Secretary Alex Azar. In response to the pharma trade group’s Guiding Principles changes, Azar asserted that patients will need more than “voluntary action.”

“Patient empowerment and transparency are at the core of the President’s drug-pricing blueprint that was released five months ago,” Azar said in a statement. “Our vision for a new, more transparent drug-pricing system does not rely on voluntary action. 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.”

CMS Administrator Seema Verma likewise questioned PhRMA’s announcement, saying policy changes must go further to yield any sort of actional result.

“Under President Trump and Secretary Azar’s leadership to lower prescription drug prices, Americans are seeing results,” Verma said in a statement. “This year CMS released an overhauled version of our drug spending dashboards, which provided patients with pricing information for thousands more drugs than ever before and, for the first time, listed the prescription drug manufacturers that were responsible for price increases. CMS appreciates the pharmaceutical industry’s action to increase transparency, but additional steps are required to ensure that patients have all of the information they need when they are learning about a medication.”

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