Our Take: Drug prices must be in TV ads under CMS final rule
May 13, 2019
Drugmakers will be required to disclose prescription drug pricing in direct-to-consumer TV advertisements, the Department of Health and Human Services (HHS) announced Wednesday.
Specifically, the final rule affects products covered by Medicare or Medicaid and products whose wholesale acquisition cost (WAC) is greater than $35 per month.
“Patients who are struggling with high drug costs are in that position because of the high list prices that drug companies set,” said HHS Secretary Alex Azar. “Making those 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 health care.”
Elsewhere, Azar said of the pharmaceutical industry: “If you’re ashamed of your drug prices, change your drug prices.”
The CMS rule, which goes into effect July 9, stipulates that drug pricing information be displayed in text that is large enough to be read. It also allows for the publication of competitor product pricing.
Our Take: This rule may be the single most ill-advised, pointless and irresponsible health care policy idea coming out of Washington since the Trump administration took over. And that’s saying a lot.
On the surface, forcing manufacturers to list their drug prices is a step toward transparency, as Azar says. Consumers have a right to know how much their drugs cost.
Except the drug’s list price isn’t how much the drug really costs, unless you’re uninsured. Most Americans — about 91% — have health insurance provided by their employer, through an ACA exchange or through a government program such as Medicare, Medicaid or Tricare. Assuming that your coverage includes a prescription drug benefit plan, you pay the copay, which for any given drug will vary from plan to plan.
No one pays WAC. Not even the pharmacy benefit managers, whose net price after discounts and rebates is nowhere near WAC.
PhRMA complained that showing pricing information might discourage people from seeking treatment, which, to Azar’s second point, should have the industry asking itself some tough questions.
Our beef is that HHS’ move feels more like theater than sound public policy. It’s unlikely to have any effect on pricing, with one exception: Having the ability to publish competitor prices might force WAC lower.
Let’s play out that scenario. Product A has a list price of $100/month and Product B has a list price of $95/month. Presumably, the maker of Product B would want to highlight this fact in its TV ad. Then, the ad runs ad nauseam — like the ads for psoriasis drugs and the one with the nicotine-addled turkey — until the company that makes Product A lowers its price to $90/month. Now, it’s on: The pricing war has begun.
The problem is, as we pointed out, nobody pays $100/month. When Bob fills his script at the local CVS, he pays a $20 copay, and whether Product A or Product B is in the bag depends entirely on Bob’s insurance and the tiered formulary associated with his prescription drug plan.
So, the rule is misleading. If the goal is to empower consumers and “put patients in charge” of their health care, listing WAC prices in drug ads will fail to accomplish that goal.
Nevertheless, the rule will be applauded by Democrats and Republicans alike. As the renowned cancer researcher Dr. David Hong pointed out in a recent episode of Health Care Rounds, “Despite the fact that as a country we’re divided about almost every major issue, the only thing that we’re actually united about is drug pricing.”
That may be true, but HHS’ publicity stunt masquerading as public policy needs to be called out for what it is: a bunch of BS.
What else you need to know
La Crosse, Wis.-based Gundersen Health System and Marshfield Clinic Health System are in merger talks, according to a joint statement issued by the health systems. The combined system would include 2,000 clinicians and 19,000 employees, with a presence across Wisconsin, northeastern Iowa and southeastern Minnesota. “This opportunity to unite promises the potential to magnify our impact and bring our care model to even more communities by leveraging the strengths of two mission-driven systems with more than a century of commitment to rural health care,” said Dr. Scott Rathgaber, Gundersen’s CEO.
UnitedHealthcare (UHC) launched a new bundled payment program for maternity care with two health care providers in New Jersey and Texas. The payment model builds on UHC’s existing maternity program, which, according to the company, has contributed to fewer non-medically indicated C-section deliveries, reduced both predelivery hospital admissions and the average length of stay in the neonatal intensive care unit (NICU), and decreased other delivery and newborn-related costs. The bundled payment program was developed in collaboration with the U.S. Women’s Health Alliance, a national organization of health care practices. UHC expects up to 20 provider groups to be part of the program by year-end.
President Trump is endorsing Florida’s plan to import drugs from Canada, Politico reported. Rep. Matt Gaetz, R-Fla., told Politico that Trump met with HHS Secretary Alex Azar and Gov. Ron DeSantis last week to discuss a bill passed by the state legislature that establishes a Canadian import plan for state health departments. The program requires HHS approval before it can be implemented. Vermont passed similar legislation but has not received federal approval. “[President Trump] said for the governor to be prompt in production of the plan, and for the secretary to be prompt in review of the plan,” Gaetz said.
Kaiser Permanente announced that it is launching Thrive Local, a social health network, this summer. The company said in a press release that the network would be available within three years to all of Kaiser Permanente’s 12.3 million members and the 68 million people in the communities Kaiser Permanente serves. In addition to being integrated into Kaiser Permanente’s EHR system, Thrive Local’s network of resources will be made available to community-based organizations. “These communities’ health care providers and caregivers will now have unparalleled capabilities to seamlessly match an individual’s social needs with the appropriate services from within a robust network of nonprofit, public and private resources,” Kaiser Permanente said in the press release.
A U.S. District Court judge struck down the 340B rate cut HHS implemented in 2018 and 2019, writing that the cuts were unlawful. Judge Rudolph Contreras did not provide the relief the plaintiffs requested, which would cover the reimbursement the hospitals would have received if the cuts hadn’t been implemented. The suit was brought forth by three associations — the American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges — along with Eastern Maine Healthcare Systems, Henry Ford Health System and Fletcher Hospital.
Premier Inc. is selling its specialty pharmacy business to ProCare Pharmacy LLC, a subsidiary of CVS Health Corp. Valued at about $40 million, including the transfer of inventory, the deal is expected to close by June 30. Premier said the sale was made in connection with the company’s plans to discontinue its specialty pharmacy operations conducted by Acro Pharmaceutical Services and Commcare Pharmacy.
What we’re reading
How The Trump Administration Is Reforming Medicare. Health Affairs, 5.3.19
Why Do Accountable Care Organizations Leave The Medicare Shared Savings Program? Health Affairs, May 2019 (subscription required)
Doing Health Reform Better: Listening to the Public. JAMA Forum, 5.7.19