The New Rules: Disclosing Drug Prices in DTC Advertising
Jeff Carbone, VP Payer Strategy
and Oren Eisenberg, Director, Strategy
Less than a year after the release of President Trump’s American Patients First plan, the U.S. Department of Health and Human Services (HHS) has finalized the first rule implementing the blueprint—aimed at increasing transparency for patients and bringing down overall drug costs both for patients and for the Medicare and Medicaid programs.
The final rule from the Centers for Medicare & Medicaid Services (CMS), which goes into effect July 9, 2019, will require direct-to-consumer (DTC) television advertisements for prescription pharmaceuticals to disclose the “list price” within the ad itself.
How It Works
For medications covered by Medicare or Medicaid that cost $35 or more, this ruling will now require the advertiser to disclose the product’s list price to TV viewers.
The list price, also known as the wholesale acquisition cost (WAC), is an estimate of the manufacturer’s price for a drug to wholesalers or direct purchasers. WAC does not include discounts or rebates via third parties such as insurance or a pharmacy benefit manager. As a result, this price is higher than most consumers will actually pay out of pocket (OOP) at the pharmacy.
The price disclosure will be structured as the following: “The list price for a (30-day supply of) (typical course of treatment with) (name of prescription drug or biological product) is (insert list price). If you have health insurance that covers drugs, your cost may be different.”
These new regulations apply to TV advertising only, including broadcasting via streaming services. However, brands may elect to use other channels (eg, website, email, or social media) to help patients find, explore, and better understand the real-world cost they may expect to pay with insurance.
Reactions and Responses
While the consensus is that price transparency overall is good, there is strong disagreement about how effective the methods will be in actually lowering drug costs.
According to HHS Secretary Alex Azar, the regulation will create greater public pressure to reduce rising healthcare costs for consumers. Azar stated, “[Making drug prices] more transparent is a significant step in President Trump’s efforts to reform our prescription drug markets and put patients in charge of their own healthcare.”
Critics, however, believe the ruling may create greater confusion in the market because a treatment’s list price is not an accurate portrayal of what most consumers will pay.
Further, industry groups like the Pharmaceutical Research and Manufacturers of America (PhRMA) fear that the move may create a negative effect over prescription products, arguing, “We are concerned that the administration’s rule requiring list prices in direct-to-consumer television advertising could be confusing for patients and may discourage them from seeking needed medical care.”
How This Will Affect Manufacturers
Manufacturers are clearly impacted negatively as public outcry will likely surface as the cost of medications are made more public. As most patients never deal with WAC pricing, manufacturers may be challenged with having to answer for what is perceived to be an exorbitant cost.
Manufacturers do have the opportunity to educate the consumers as to how much or how little they will pay utilizing the drug’s Hub and access support sites through coupon programs. This has the potential to help brands that are on a disadvantaged formulary if patients request to take a specific drug because of the minimal copay. If a brand can demonstrate that its OOP cost is aligned with the generic OOP cost, this could start to create challenges for payers and physicians who have traditional standards of care based on overall cost, not solely a patient’s OOP cost.
The Impact to Consumers: Part D Members and Cash-Paying Patients
The patients who will likely benefit from this legislation are Medicare Part D enrollees, since only cash-paying and Part D patients are directly impacted by the list price. Seeing a WAC price could help a patient understand the amount they may need to pay.
For Medicare Part D patients, the coverage gap otherwise known as the “donut hole” represents a percentage of OOP costs directly related to the list price of pharmaceuticals. Medicare Part D covers initial therapies before the patient becomes responsible. If the patient continues to accrue OOP costs, eventually catastrophic coverage kicks in for the patient.
What This Means for Health Plans
The new guidance may have unintended consequences for health plans. The pressure on manufacturers should seemingly help insurers control costs and inform the public of high pharmaceutical costs. Benefit designs are constructed to help patients utilize the most cost-effective treatment available for patients, the health plan, and the entire risk pool. However, patients may want to take ownership of treatment decisions based on copay programs. This may disrupt “generic-first” benefit designs and increase costs. In addition, health plans and PBMs are entered into volume- and value-based agreements and are not subject to WAC pricing. Disruption to the HCP workflow could negatively impact these contracts and the ability for payers to negotiate with manufacturers.
What Marketers Need to Know
- If your brand meets the ruling’s cost criteria and runs TV advertising, including streaming services, creative must be updated to comply with the final ruling by July 9, 2019
- Many brands have begun planning for this ruling in compliance with revised industry guidelines published by PhRMA in late 2018
- The final ruling does not require any action for marketing over digital or print channels
- Proactive marketers, however, should develop resources and tools to help patients better understand the real-world costs they can expect to pay
- Brands should consider strengthening the role of savings cards, coverage claims, and other access claims in messaging to quell concerns for those exploring treatment
With the mandate to change now in effect, Evoke is ready to help your brand adapt effectively. Speak to your Evoke Client Services lead or contact firstname.lastname@example.org to learn more.