Gag Clause Bills Signed into Law, Improves Healthcare Transparency

October 11, 2018 - President Trump has signed into law two bills that prohibit pharmacy gag clauses, or the practice of prohibiting pharmacy and healthcare transparency.

The laws – one targeted at Medicare plans and one for private and employer-sponsored plans –make it illegal for healthcare payers, managed care organizations, or pharmacy benefit managers (PBMs) to enact “gag clauses” on pharmacists and other providers.

Gag clauses are provisions that are a part of a pharmacists’ contract with a payer or managed care organization that prohibits that pharmacist from disclosing to a patient that an equally effective but less expensive drug option exists.

Gag clauses have been known as a threat to healthcare price transparency. Proponents of the newly-minted laws say getting rid of gag clauses gives patients greater freedom to access the medications that will work best for them physically and financially.

“For years pharmacists have been providing great care but have been prohibited by contractual restrictions from sharing information on how patients might better navigate their prescription drug costs,” said American Pharmacists Association (APhA) CEO Tom Menighan, BSPharm, MBA, ScD (Hon), FAPhA. “This new law allows pharmacists to have those needed conversations with patients.”

“APhA applauds Congress and the Administration’s actions against PBM practices that negatively affect patients.” Menighan added. “It is not only good for patients, it is good for the health care system and promotes transparency.”

The bi-partisan legislation sponsored by Susan Collins (R-ME), Claire McCaskill (D-MO), Debbie Stabenow (D-Mich.), John Barrasso (R-Wyo.), and Bill Cassidy (R-La.) specifically prohibits gag clauses on a national level. Until now, such provisions only existed at a state level.

Signing this legislation comes as a part of the Trump Administration’s efforts to curb out-of-pocket patient spending on high drug costs, according to HHS Secretary Alex Azar.

“This bipartisan legislative accomplishment was secured by President Trump’s historic leadership on drug pricing,” Azar said in a public statement. “The President’s drug-pricing blueprint called for ending gag clauses. Within a week of the blueprint’s release, HHS informed Medicare plans that they are unacceptable, and now Congress has responded to the President’s call by formally banning them.

“American patients should know: You can always ask your pharmacist whether you’re getting the best deal on the prescription drugs you need,” Azar continued. “This is just one step in the President’s plans to deliver better healthcare to Americans at lower prices, efforts that have already involved more action to bring down drug prices than any previous President has taken.”

Until now, gag clauses have been a primary contributor of high out-of-pocket spending for patients. An oft-cited study published in the Journal of the American Medical Association (JAMA) revealed that patients overpay up to $135 million for their medications.

Just over nine million patients overpay for medications each year, with most overpayments totaling at over $10 per patient, the researchers found.

Outlawing gag clauses could put a cap on that overspending, lawmakers agree. Equipped with information about generics and other low-cost alternatives, patients may choose a different, more cost-effective medication.

As noted above, signing this legislation comes as a part of the Administration’s battle against high drug prices. Earlier this year, President Trump and HHS released its drug pricing blueprint, which called into question the exorbitant amount of money spend on medications each year.

Specifically, the blueprint called for better price transparency, which in turn could empower patients to choose less costly drugs.

While price transparency and getting rid of gag clauses is an important step forward in lowering out-of-pocket healthcare costs, some industry experts say these moves do not go far enough. Representatives from consumer advocacy group Public Citizen state that the laws do not address the underlying cause of high patient financial responsibility.

“While these gag clause prohibitions will provide modest relief to some patients, for most they will have no impact whatsoever,” said Steven Knievel, Access to Medicines Advocate for Public Citizen. “They do absolutely nothing to address the underlying problem of prescription corporations charging exorbitant, unfair rates that put medicines out of reach of patients.”