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Naming and shaming has become an integral part of President Donald Trump's drug pricing efforts. A series of tweets earlier this year has pushed pharmaceutical companies, including Pfizer Inc., to temporarily suspend price increases.
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See the original tweet.
The tactic is being raised to a new level with the administration's plan, officially revealed Monday afternoon by the Secretary of Health and Social Services, Alex Azar, to compel drug manufacturers to disclose the price of the drugs. medicines available under Medicare or Medicaid in their TV ads. The idea is that if pharmaceutical companies are to disclose what they charge so obviously, they may not charge for drugs as expensive at first and be less inclined to raise prices.
For many Americans, the price reduction plan would be one of Trump's most visible efforts to keep prices low. But this may also be one of the least well-designed and least impactful initiatives to date.
The main problem with the proposed rule is that the price listed on a medicine's list or its price is far removed from what many people or their health care plans pay. Almost all drugs, and in particular the widely used drugs that justify large direct-to-consumer advertising campaigns, represent a significant discount to the price that their manufacturers would be required to disclose in advertisements.
In fact, the actual cost for patients with health insurance is generally even lower than the discounted price paid by health plans. Patients often pay only a portion of the total price via a co-pay or co-insurance. This can be substantial in some schemes – especially for those with high deductible insurance, a point highlighted by Azar on Monday – but it is often only a fraction of the total price of $ 50. a drug. In addition, drug manufacturers often offer coupons or other types of assistance to meet these costs.
Most consumers will not immediately know that the impressive number of an advertisement does not match what they should actually pay – and it would be quite difficult to explain the obscure details of the prices catalog, discounts and cost sharing in a few cases. seconds of voiceover in a television commercial. It is even possible that some people are discouraged from trying to obtain medications that are beneficial to them because they mistakenly think they can not buy them.
This does not mean that list prices are irrelevant or should not go down. In the end, they are a very high starting point for negotiations. And even after discounts, we can say that prices in the United States are much too high.
But this is not a particularly effective way of dealing with this problem. First of all, it is not clear that this rule is satisfactory to the first amendment or that the administration has the power to require this type of disclosure. The industry seems ready to fight it and could win.
In the event that the rule actually comes into force, it would be unlikely that drug manufacturers would lower their catalog prices, which would have serious financial consequences, simply to avoid clumsiness. The fact that drugs are expensive is not new to most Americans. In fact, lowering prices would probably require much more complex policy interventions, such as allowing Medicare to negotiate directly with drug manufacturers or reform the patent system.
The sector is also working to get ahead of the rule. The industry lobby, PhRMA, announced Monday that it was encouraging its members to direct consumers to information about the cost of a drug in future mainstream ads. It's a safe bet that they will insist that the average cost to patients is generally lower than the list price.
Transparency is a laudable goal in terms of drug prices and broader health care. It is often difficult to say who pays how much and for what. But instead of helping to dispel confusion among consumers, this rule would probably add it.
To contact the author of this story: Max Nisen at [email protected]
To contact the editor responsible for this story: Beth Williams at [email protected]
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Max Nisen is an editorialist with Bloomberg Opinion, specializing in the areas of biotechnology, pharmacy and healthcare. He had previously written on management and business strategy for Quartz and Business Insider.
© 2018 Bloomberg L.P.
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