As soon as this summer, TV ads for prescription drugs are going to look a little different: the Trump administration recently finalized a rule that will require drug makers to show a medication’s list price. As a future physician, I am against this change. Adding the information would make the ads less helpful and more confusing for patients, who are powerless to change the complex system driving out-of-control prices.
Seeing sky-high prices on TV might discourage patients from seeking medical care for conditions they suspect they may have and asking their doctors about advertised medications. In fact, many patients only pay a fraction of the wholesale acquisition cost, or list price, that companies will be required to list in ads. On the other hand, high prices could create the false impression that the advertised brand-name drug is somehow better than more affordable options already on the market, whether that be a generic or a more affordable and functionally equivalent brand-name therapy.
Advertising prices also fails to address any underlying drivers of high drug costs in the U.S. The Trump administration’s rule analogizes prescription medications to things like cars and houses, where including prices in ads drives competition. This comparison wrongly implies that medications are sold in a free market where patients hold the buying power and can drive competition by taking their business elsewhere.
The prescription drug market is not truly competitive. U.S. regulations designed to spur innovation grant manufacturers varying degrees of market exclusivity. These exclusivities allow companies to set prices without direct competition. The only competitors that can serve as a benchmark when pricing a new medication are clinically similar drugs already on the market, but these are only available for a small fraction of newly approved medicines. Prices are, therefore, determined based on anticipated revenue and whatever the market can bear. Manufacturers can then take advantage of their monopolies by drastically increasing prices year after year.
Even armed with price information, patients do not hold buying power. And most do not experience the high costs that might drive them to more affordable alternatives. Despite per capita drug spending increasing by 76% between 2000 and 2017 (adjusted for inflation), out-of-pocket costs per patient only increased by 21%. This is due to a complex and opaque system of discounts and rebates negotiated between manufacturers, pharmacy benefit managers, wholesalers, and payers that hides the impact of rising list prices from patients. This system squashes incentives to price competitively, and relies on average Americans to foot the bill via insurance premiums and tax dollars.
Pharma companies know patients do not pay the list price, and can use that fact to their advantage. The visual Johnson & Johnson will include in ads for its most prescribed medication, the blood thinner Xarelto, shows the $448 list price, in addition to the “normal range” of what approximately 75% of patients would pay out of pocket. That price, for Xarelto and most other medications, will likely start at $0. A recent study showed that although advertising a high price tag decreased interest in a particular drug, the effects were either reduced or eliminated by an added modifier noting “eligible patients could pay as little as $0 a month.”
As a current medical student, and soon-to-be physician, I have been taught the importance of shared decision-making and high-value care. For me, this means that my scientific and clinical knowledge does not exist in a vacuum. When helping a patient with atrial fibrillation and renal failure choose the best blood thinner, I must consider their liver and kidney function, as well as Xarelto’s list price and my patient’s insurance coverage.
I recognize that I will never be able to memorize the list prices of every medication, and might need a graduate degree in mathematics to calculate their out-of-pocket costs by hand. That is why patient-specific pricing information should be more accessible at the point of prescribing. Many electronic health records already have tools that can determine what an individual patient would pay for most medications. Improving these tools, incorporating them into the doctor’s home screen for each visit, and encouraging their use would bring this information to patients where it matters, rather than in the vacuum of their living room couch.
Any move to increase transparency must also shed light on manufacturers setting prices, pharmacy benefit managers negotiating rebates, and insurers setting formularies, just for starters. But greater transparency at the point of prescribing would shift the responsibility for balancing clinical and monetary information away from patients and onto physicians, where it principally resides. As doctors, we must understand the costs of the treatments we prescribe, speak up when prices are unreasonable, and protect our patients from medical and financial hardship better than any TV ad ever could.
Aaron Troy is an M.D. student at the NYU School of Medicine, and an incoming master’s student at the Harvard T.H. Chan School of Public Health.
I disagree. Patients are not powerless, they are VOTERS, and these announcements will prompt awareness of the insane drug prices among the public – which some of course ARE aware of but others are rather oblivious and are inclined to give the rapacious drug-makers an undeserved pass. (Of course, much more should be done too, and I am happy you plan to be price-aware – and also push for more individualized price information – as a doctor – but very sorry that is necessary as it diverts some of your attention that could be spent on medical matters.)
I do not think that it will drive down prices at all. The idea was to embarrass the drug company cabals so that they are too ashamed to advertize a drug that costs $2000 p.m. in the US and $8 p.m. in AU. Drug companies could care less about the patients and what it costs them. It is the shareholders and the profits – that is all that counts. What is the difference if the price is on an advert or not – the insurance company pays. In fact one of the main costs added to drugs is that fact that they advertise at all. It is a huge windfall for TV companies and they encourage it. The massive cost to advertise is added to the cost of the drugs. What patient understands the advert and what doctor is going to prescribe a drug because a patient heard about it on TV. And if the doctor learns about it from a patient, from a TV ad, then they should not be in practice. No advertising for drug companies at all is the way to start.
Well put Aaron. When I first heard about this bill I thought it was a good idea, but through further consideration, it is clear this isn’t the case. I like your take that the weight should rest on the physicians shoulders to make the best decisions for their patients about prescriptions.
Well put. I agree with you entirely. I cannot believe that the Administration truly thinks that publicizing drug prices will cause a reduction—which invites the obvious question: Why, then, are they enacting this rule? What is the real motivation?
I have yet to see a doctor want to, much less succeed at, memorizing all the prices for all their patients on different formularies+Medicare. Yes, perhaps they “should” in some perfect world, but this is not it. Patients seeing sky-high prices may be the only way pressure gets applied to companies and legislators to bring prices down. I understand your concerns, but I fear you have found a solution that is simple, easy, and wrong.
Thanks so much for your thoughts. I agree, memorizing prices is unrealistic. That is why I suggested incorporating that individualized information into the EMR workflow, as is done for many inpatient studies. It’s by no means a comprehensive solution, this is a systemic issue, but I believe it’s a better alternative than forcing patients to contextualize this information themselves.
I would point out that if we had true single payer, hence single price for a drug, writing programs to provide individualized drug price information based on a zillion different insurance plans would not be necessary and it would be far easier to know what a drug would cost a patient. Yes, the answers are much more than this tiny step – but I think it’s a constructive step that will put pressure on the industry and that is much needed. So I agree with Kate.
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