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Smart Thinking blog

Insights and expert advice on the key issues facing today’s pharma marketer

Let's throw it against the wall and see what sticks...

Why including drug costs in DTC advertising is an idea full of holes

You’ve heard by now. I’m sure you have. The Department of Health and Human Services in the United States has submitted a proposal to the White House Office of Management and Budget (OMB) to effectively mandate the inclusion of drug prices in direct-to-consumer advertising.1 And, make no mistake about it, this is receiving some serious support.

The head-scratching questions about the proposed implementation of this policy are many and varied. What price are we going to show consumers – the list price? The price after manufacturer rebates? And which drugs are going to be subject to this policy – every single one? Certain ones? What about drugs that

are dosed based on weight? Or drugs that are dosed once a month? Or once a week, instead of daily? How do we account for patients who don’t pay the actual price for their therapy because they have private insurance? In other words, the price at the pharmacy counter is not the same as the price shown in DTC ads. What about therapies for which manufacturers provide some level of financial support,

such as a co-pay card or compassionate use. What about therapies that come with patient support programmes, nutrition counselling, reimbursement support and other similar ancillary benefits – do these get factored in to the drug price? There are dozens of other questions that surround this policy proposal.

And, in case I forgot to mention it, none of these questions even considers the potential legal challenges that could be brought to bear on this proposal from a First Amendment perspective. Some legal scholars are not even sure that this could survive a challenge in the courts if pharmaceutical companies actually pushed back.

The US administration states that this policy proposal is designed to lower drug prices. But how, exactly, is this supposed to work? One theory is that the mere act of showing the public the egregious nature of these prices will motivate a massive public outcry that will shame manufacturers into lowering their prices. Right.

When faced with the cost of a drug, patients do not think about the socially optimal price point

Other than the aforementioned ludicrous idea, I haven’t seen a single alternate explanation about how this is intended to work in practical terms. Consumers are already aware of the egregious nature of today’s drug prices. They are all aware of the double-digit-per cent annual price increases taken by manufacturers without justification. Today’s patients already know that anything short of a mild, transient and acute condition has the potential to render them bankrupt. What effect has it had ondrug prices? Zero. Why would publishing drug prices be expected to have a different effect?

The real concern here is that this will only serve to confuse people as they struggle to understand the nuances of the price of their therapy. And if you’re wondering what the big deal is about a little confusion, then there’s this to consider: it’s not the confusion itself that worries us but the resulting behavioural impact. The decision to forego care because it could cost too much based on a patient’s misunderstanding of a price seen in an advertisement. Or to ration a 90-day supply of heart pills so that it stretches into a 120- day supply in an attempt to get more bang
for one’s buck. The unintended consequence of this policy proposal is that it will most certainly not lower drug prices and may actually raise overall system-level costs as patients reduce their adherence to medications or skip doctor visits out of fear that they will be prescribed a drug that they can’t afford.

What we know about healthcare is that there is an asymmetry of information everywhere: between doctors and patients on disease knowledge; between patients and insurers on health status; and between manufacturers and, well, pretty much everyone on the true cost of medicines. This asymmetrical information is not ideal but it’s a reality. This doesn’t mean that

we should simply forget about drug prices. But it does mean that until we have a mechanism for transferring some sort of negotiating power to the individual consumer, there is very little that showing someone a drug price can do to lower drug prices in general. When faced with the cost of a drug, patients do not think about the socially optimal price point; they think about the private benefit: ‘How will this affect me?’ Understanding this is crucial to coming up with better policies to impact drug prices.

Article by
Rohit Khanna

is Managing Director of Catalytic Health, a healthcare communications, advertising and strategy agency. He can be reached at: rohit@catalytichealth.com

19th October 2018

From: Sales

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