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DTC-In-Perspective by Bob Ehrlich

Congress and DTC Price Disclosure

January 30, 2025 0

The idea of mandating drug price disclosure in DTC ads is here again. A bi-partisan Senate bill was just introduced by Senators Durbin, Grassley, and six others calling for mandatory listing of the wholesale acquisition cost in ads. It is called The Drug-Price Transparency for Consumers Act of 2025.

As with prior attempts, this is bad policy. List prices are not what consumers pay. They are nowhere near what the overwhelming proportion of patients will eventually pay if insured. This bill is meant to discourage DTC advertising by creating a false belief that many drugs are “outrageously” expensive. Their rationale is consumers deserve to know the price of drugs being advertised. They say many other products list their price in ads so why not list them for drugs.

The problem is consumers only care what the final out of pocket cost is to them. Drug pricing is overly complex and that is a legitimate policy issue. Telling consumers a cancer drug is $5,000 a month in a DTC ad is not at all helpful to them if they actually pay $50 with insurance. All that faux disclosure might do is scare them into thinking they cannot afford it.

The bill sponsors’ logic is faulty that listing price creates transparency and price competition. There is no evidence that listing drug prices creates competition given the list price is nowhere near actual patient price. Yes, it may work for automobiles, but not for prescription drugs.

This bill is a blatant attempt to discourage drug ads because payers would prefer consumers not request information on high-priced drugs. Government, insurers, and other payers want to be the sole deciders on what drugs patients can get. DTC is inconvenient for them if a doctor prescribes a high-priced therapy. Does Congress think doctors are prescribing a $100,000 drug for cancer just because a consumer saw an ad?

If this bill passes, drug makers will have to add another useless super in the ad. They can do it if required but will not be intimidated into dropping their DTC ads. Clearly this bill is something the courts might weigh in on as the forced price disclosure inhibits commercial free speech.

Telling consumers a cancer drug is $5,000 a month in a DTC ad is not at all helpful if they actually pay $50 with insurance.

Unfortunately, this bill may just be one of many tactics Congress or HHS will use to try to discourage DTC ads. Robert Kennedy, Jr. wants to ban DTC TV ads outright, but that is unconstitutional so expect approaches that make it harder to do DTC. That could be through tax policy on deductibility of advertising costs, increased OPDP interpretations of violative language, more requirements for fair balance, and lobbying pressure by insurers and payers to limit DTC.

I get the frustration that Americans pay more for prescription drugs than other developed countries. This is a highly charged issue and deserves policy debate. Limiting DTC advertising for lawful products will not affect prices. That $8-10 billion being spent on DTC annually is not significantly driving up costs given our drug spending is over $500 billion annually. Of course, I admit drug companies advertise to increase demand. Given an average ROI of 2 to 1, advertising likely adds $16-20 billion to sales or about 2%. Would drug companies cut prices if they did not spend on DTC? No, they would reallocate to other promotional techniques or other investments.

It is time for Congress to stop trying to ban or restrict DTC. They are grandstanding to the American people with full knowledge their bill is not a real solution to reducing drug costs.

Bob Ehrlich

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DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Drug Prices in DTC Ads? Bad Idea Gets Traction.

September 5, 2018 0

The Senate recently passed an amendment to a larger health care bill that requires drug prices be disclosed in DTC Ads. The Durbin amendment was adopted with bipartisan support. It really just gives HHS a million dollars to study a way to require the disclosure. What is clear is this idea has strong support from President Trump, Congress, HHS Secretary Azar, and the American Medical Association. So, like it or not, the drug advertisers may be forced to add some price information to ads.

Bob Ehrlich
“Drug makers may be forced to add… price information to ads.”
-Bob Ehrlich

On the surface, that list price disclosure seems reasonable. We see MSRP in car ads, so we know whether it is a premium or economy car. Not that we don’t know that already but it is not unreasonable. For cars, we know we will likely pay somewhat less than MSRP but we do know the range a Mercedes will cost us. Congress thinks consumers deserve to know the price of drugs they see advertised. To Congress that seems like it would help consumers decide if this advertised drug should be considered.

Drug pricing is not like car pricing. Consumers pay much less than the list price and sometimes pay nothing for the $50000 drug for cancer. Admittedly, drug pricing is a Byzantine process that confounds most of us. Each insurance company, PBM, and government payer negotiates prices. Each consumer depending on their insurance pays a different price no way near the list price. Sometimes the consumer would pay out of pocket more for their OTC cough medicine than the $50000 cancer drug.

So how should drug companies disclose drug prices? If the list price is not anywhere near what consumers pay, then how does disclosing it help them? It does not. It helps insurance companies in making DTC more difficult for drug companies to execute. The knowledgeable legislators know that if they force drug makers to talk about price that may discourage them from doing DTC Ads for expensive drugs. Drug makers advertising the $100000 cancer drug may decide that DTC is not worth trying to explain the complexities of drug pricing or face the barrage of criticism for having a sticker shock price.

I think this is the real reason for this amendment. Embarrassing drug companies they hope will put a chill on DTC for cancer drugs, biologics for arthritis, Crohn’s, and other new premium drugs. Of course, all drugs will face a guidance on how pricing needs to be discussed. Somehow FDA will make disclosure a time consuming step in a DTC ad. That will add 10-15 seconds to the ad and may make them difficult to execute. Their hope is to get drug companies to stop doing DTC.

So the good news is it will take FDA a while to study and draft guidance for disclosing price. This lag may allow the powerful advertising lobby to show how impractical this disclosure requirement will be. My guess is we may have some compromise that speaks in terms of ranges of price. That is something like “most patients will pay much less than the price listed depending on your insurance coverage.” Or, drug makers may be able to say “the average price paid by consumers is x.”

It may be illegal to require drug makers to disclose price under commercial free speech grounds. I am sure the advertising lobby will argue this inhibits commercial speech. They would have a strong case based on precedent.

My advice to the agencies is to be ready to deal with adding some price statement but I am sure it will be a few years before FDA can figure out how best to do this. They research everything they do and that will take a long time to study. DTC price disclosure sounds great but is just a bad idea that will not help patients.

Bob Ehrlich