On the first development, the AMA House of Delegates
recently
supported the adoption of Resolution 236
Retail Price of Drugs Displayed in Direct-to-Consumer Pharmaceutical
Advertising. The text of the resolution as adopted is brief:
Resolution 236 asks that our American
Medical Association advocate to the applicable Federal agencies (including the
Food and Drug Administration, the Federal Trade Commission, and the Federal
Communications Commission) which regulate or influence direct-to-consumer
advertising of prescription drugs that such advertising should be
required to state the manufacturer’s
suggested retail price of those drugs.
The AMA is a powerful lobbying group, but it raises the
question of whether the FTC or the FDA has any authority to require the
disclosure of retail prices in direct-to-consumer (DTC) advertising of
prescription drugs. My quick response would be no–– neither the FDA nor the FTC
has such authority. The FTC’s
Division
of Advertising Practices “protects consumers from unfair or deceptive
advertising and marketing practices that raise health and safety concerns, as
well as those that cause economic injury.” Accordingly,
from
the very beginning of DTC prescription drug ads, the FTC has aimed at
ensuring that consumers are not misled or deceived: “In particular, it is
important to protect consumers from deceptive information but not to stifle
truthful information that could benefit consumers.” There is almost no chance
that the FTC would find that an ad is deceptive or misleading because it fails
to state the price of the item advertised. Similarly, the FDA’s focus in
prescription drug advertising also is on ensuring that the ads are not
misleading (and that they do not suggest the product can be used for conditions
for which the FDA has not approved the drug). In my recent post on DTC ads
A
Better Balance Between Accelerated Access And High-Priced New Drugs: A New
Conditional Approval Option I made the argument that those ads are
generally misleading with respect to the effectiveness of the advertised drugs.
So while it is significant that the AMA is continuing to express its concern
about prescription drug prices, this particular action by the AMA is not likely
to have any effect at all.
The other development I will briefly discuss in this post is
the growing awareness of the gap between retail prices (such as those the AMA
would like to see disclosed in DTC ads) and the prices actually paid by a
variety of payors (the “price gap”). How big is the price gap? QuintilesIMS
Institute addressed the question in its Annual Report
Medicines
Use and Spending in the U.S. (May 2017). The executive summary of the
report began with what is truly the bottom line:
Spending on medicines increased by 5.8%
to $450Bn in 2016, growing at less than half the rate seen in the last two
years, based on invoice prices. After adjusting for estimated rebates and other
price concessions by manufacturers, which continued to rise in 2016, net
spending was $323Bn, up 4.8% over 2015 levels. When adjusted for these
concessions, as well as economic and population growth, medicine spending
increased 2.6% in 2016 and has increased by an average of 1.1% per year since
2006, while the balance of medicines being used has shifted strongly to
specialty medicines from traditional treatments.
The Report then went on to summarize its findings with
respect to year-over-year increases for drugs already in the market:
The average net price for brands
already in the market is estimated to have increased by 3.5% in 2016, up from
2.5% in 2015, while remaining significantly lower than prior years. This reflects
the heightened competition among manufacturers and more aggressive efforts by
health plans and pharmacy benefit managers to limit price growth. Invoice price levels, prior to the impact
of concessions, increased 9.2% in 2016…. [emphasis added.]
What are the takeaways from the
IMSQuintiles Report? The ridiculous annual increases in retail prices for
existing drugs (the 9.2% in the Report) are the attention-grabbing headlines of
a
number
of stories on drug prices, but only the starting point for the price
negotiations with payers and pharmacy benefit managers (PBMs). The price gap is
a much more complicated part of the drug pricing story, which is closely linked
to another major part of the pharmaceutical marketplace, the role of PBMs. Back
in March,
Bloomberg
BNA reported that Senator Wyden (D.Ore) “proposed legislation that would
force drug middlemen to disclose secret discounts they receive from
manufacturers, a sign of growing scrutiny of the role played by pharmacy
benefit managers in high prices.” Wyden’s proposal,
S.637 -
Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017 is, as the title suggests, about increasing
transparency in prices (for Medicare Part D drugs), which in theory can lead to
more negotiating power on the buyer side and lead to lower prices overall. This
kind of transparency in the prices actually charged for drugs is very different
from the “transparency” that is the subject of a number
of state laws seeking to require disclosure of the costs of developing
individual drugs. Sarpatwari et al reviewed those initiatives
in The New England Journal of Medicine and pointed out the conceptual and
practical difficulties with “cost of development” disclosure mandates. My own
analysis is that transparency in the actual prices paid, which is the focus of
the Wyden proposal would be helpful. Marketplaces require information to work. While
much of the information needed for the pharmaceutical marketplace to work is
information about the actual effectiveness of a drug, prices paid by other parties
is also extremely useful. The problem of rising drug costs is unlikely to be
solved by information about prices, but it would at least be a step in the
right direction.
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