Sen. Richard Durbin (D-IL) introduced an amendment to an appropriations bill this week that would force drug manufacturers to disclose the “list price” of a drug in any advertisement. Durbin is not the first to suggest this policy and, in fact, the Trump Administration has also floated the idea.
Consumers deserve to know how the price for their medications is reached – but this prescription is not the way.
List price is simply the price a manufacturer sells a drug to a wholesaler but doesn’t account for discounts and rebates. Most significantly, the list price is largely divorced from the price that patients pay, as pharmacy benefit managers, insurers and other actors negotiate substantial coupons, rebates and other discounts for drugs directly from the manufacturer. These savings are supposed to be passed onto the patient, but that’s not always the case.
Left out of Sen. Durbin’s amendment is the way actors like Pharmacy Benefit Managers benefit from increasing list prices, as they can pocket more of the rebates and savings, creating a perverse incentive for PBMs to profit off of higher prices.
Similarly, after a PBM has negotiated a discount, insurers have to devise a price and formulary based upon the PBM’s price, federal, state and local laws and general business considerations. In some instances this means that patients could be better off paying for their prescription without their insurance, as the price will actually be lower.
These middlemen use every tactic available to protect this system and keep patients in the dark. Contractual clauses known as “gag clauses” are often inserted into PBM contracts with pharmacies, preventing the pharmacist from telling you when you could save more for a prescription.
That’s why just seeing the list price captures none of this opaque and complicated process.
Democrats think they’re pulling the wool over the sheep’s eyes by showing consumers just how much drug manufacturers charge for life-saving drugs. But they’re doing nothing to reveal the real cost-drivers distorting the cost of prescription drugs for patients. Without real transparency and accountability for PBMs and insurers, proposals like Sen. Durbin’s will only serve to muddy the waters around pricing and make it more difficult to implement real reform that will actually help consumers.
In this case, we urge all legislators to forcefully reject Sen. Durbin’s amendment and instead work to bring middlemen to heel and create real transparency in our drug supply chain.