May 12, 2022
A well-intentioned but ineffective proposal that would force drug manufacturers to post the price of prescription medications in television advertising is once again making the rounds in Washington. It’s simply impossible to show accurate prices for all patients, and trying to do so in a TV ad will confuse consumers–not help them.
The problem is that some policymakers and advocates want to make pharmaceutical companies reveal the “wholesale acquisition cost” (WAC) of their drugs, a price that almost no one actually pays. The pharmacy’s prescription price varies from patient to patient. It is based on multiple variables such as their insurance coverage, co-pays, deductibles, manufacturer discounts, and coupons, and—importantly—what supply-chain middlemen such as pharmacy benefit managers (PBMs) have done to manipulate the costs.
PBMs are third-party administrators who negotiate drug benefit programs for large employers and health plans. As such, they have a lot of leverage over drug companies because they control which drugs receive preferred placement on an insurer’s list of covered medications, known as their formulary.
In theory, PBMs are supposed to save consumers money, but they often retain excess rebates, discounts, and fees instead of passing lower prices onto patients. In the end, consumers end up paying more than the discounted and negotiated price of many drugs, which in no way reflects the WAC. In short, there is no single price that accurately depicts the cost of a particular drug for all patients, or even most of them.
Including inconsistent and inaccurate pricing information in television ads would confuse patients, not inform them. At worst, it could cause them to leave new prescriptions unfilled, decide not to ask their providers about innovative treatment options, or forgo seeking medical attention entirely because of fears about unaffordable medications.
Instead of focusing on manufacturers, who already frequently offer extensive discounts on drugs and support a wide variety of programs that help people afford their medications, regulators and politicians should turn their attention to PBMs. More transparency when dealing discounts and other costs would help consumers make good healthcare decisions.
Mandating drug pricing in television ads is a false solution to a complex problem that wouldn’t solve anything and could harm many patients. It would be far better to forget about price transparency on television and address the lack of transparency in the PBM system.
