Almost everyone agrees patients should know what their medicines cost them, and that drug pricing should be made more clear and transparent. There is a way to make this happen, but the current idea coming from Washington, when viewed in the bright light of day, is a swing and a miss for consumers. In fact, it could make drug pricing less transparent, and entirely more confusing.
We’ve all seen the drug ads on TV, online or in magazines – the ones that often involve people riding bicycles or toasting the end of day in a hot tub. The government wants to require advertisers to list drug prices in these direct to consumer (DTC) ads. So what could go wrong?
Well, plenty. A recent Op-Ed in Forbes magazine illustrated this by asking the price of soda. Sounds simple, except it’s not. Are we talking about cans? Bottles? Six packs? Discounts? On sale? Wholesale? Retail? With a coupon? And if retail, which retailer? A high-end grocer or Wal-Mart? This Thursday? Or this weekend?
And as you can imagine, soda doesn’t have a fraction of the price complexity of prescription drugs, which are a central component of the complex maze that is today’s modern healthcare landscape. Drug pricing can vary by numerous factors, including the drug’s strength and release over time, quantity, and length of prescription, to name just a few variables. Also there are great variances depending on patient insurance plans, as each insurer negotiates different prices for different drugs, and provides them at different prices to different patients, under different policies.
Prices to the patient are not set by the manufacturer that the government seeks to regulate, but by complex negotiations among Pharmacy Benefit Managers (PBMs) and Insurers. Consumer prices can vary based on the insurance plan chosen by the patient under the ACA (Obamacare) or employer-provided insurance, by co-pay terms, deductibles, rebates, patient assistance provided by drug makers, along with many other conditions. Drug makers also offer discounts to special needs populations, for example, HIV/AIDS patients in Africa, and America. Should the price listed be averaged with these prices? And what will this tell the patient about their prescription prices after they have listened to the much longer TV ads, or waded through the pages of a magazine ad’s fine print?
If manufacturers are regulated by the government to provide one of these predetermined prices, invariably the information will be outright incorrect for a great many of the people viewing or reading the ad, making an informed decision less likely and more difficult. This would be especially harmful if the advertised price is in fact inflated beyond what a particular consumer believes she can afford, thus leading to the belief the cost is out of reach.
There are further concerns with the government’s plan, such as the Constitution’s prohibition against compelled speech. Forcing drug makers to create ads that fit a government template with mandated information rams right into this prohibition, guaranteeing that this plan at the very least leads to years of litigation. It seems common sense would lead us to reject a proposal where we risk enacting an unconstitutional policy for the purpose of giving millions of consumers inaccurate pricing information on a product so crucial to their health and well being.
The free market has a better solution that actually can help patients and caregivers get much more accurate information on the cost of prescriptions, and we’ve already seen it at work. Some third party websites and apps (GoodRx for example) create a unique, individual profile for consumers by taking a patient’s particular circumstances into account, and then tailoring pricing information based on this profile. Better cost transparency is achieved through specific data, not a one-size-fits-all mandate from Washington. Over 10 million people have already been helped through these services, at low or no cost.
Drug makers are responding as well. Pharmaceutical Researchers and Manufacturers (PhRMA), in association with the National Medical Association, National Alliance on Mental Health, Cancer Care, and others, have set new guidelines for transparency of pricing to the patient, and for increased research and access to their drugs that exceed what exists now. They are currently working to create a comprehensive platform for patients to go online or through an app and get accurate and transparent costs that consumers can actually count on to be accurate to their individual situation.
Free-market and industry-based solutions to drug cost transparency will not only provide better information to consumers, but will push the drug industry to be more accountable to the patients they serve. Government intervention in this field not only makes this issue more confusing, but creates a false sense of progress where people will only be getting misleading information, leading to bad decisions. And it will be another useless layer of bureaucracy where it is not needed.
The Trump administration and Congress don’t have solutions to improve the situation, only slogans posing as progress. It is a far better policy to let the market continue on its path of greater transparency and accountability, which is the only way to truly empower consumers with accurate information to make the choices right for them.
