Drug prices in ads actually hurt consumers

This month, the Trump administration proposed a new rule that would require advertisements for prescription drugs covered by Medicare or Medicaid to include the list price of the medicine.

To be sure, a free market is dependent on consumers making informed decisions. But this move would provide patients with incomplete, misleading numbers that would muddle their healthcare decisions.

Patients almost never pay the full list price for their medication. After a drug is manufactured by a pharmaceutical company, its price and distribution are influenced by numerous intermediaries.

Pharmacies buy prescriptions from wholesalers, who purchase the drugs from pharmaceutical manufacturers. But the price most patients pay at the pharmacy is determined by their insurers, who in turn hire pharmacy benefit managers to negotiate formularies, rebates, and final prices.

Boiled down, that means the list price isn’t what consumers actually pay at the counter. Average copayments for individuals with employer-sponsored insurance fall on a spectrum from $11 for the least expensive kind of drug to $110 for the most costly, according to the Kaiser Family Foundation.

But that’s not what would appear on the television. Patients would see that a breakthrough skin cancer drug, Keytruda, costs $162,000 for a year’s supply. Or that Ibrance, a breast cancer drug that could transform a patient’s treatment, clocks in at $10,000 a month. But it wouldn’t be clear that some patients could get these drugs for only hundreds of dollars, or for free.

Worse still, this rule may give patients immediate sticker shock, discouraging them from talking to their doctors about new drugs that could have huge long-term benefits, or even save their lives.

Instead of shoehorning one factoid into advertisements, we should

provide patients with the whole picture — including the list price of the medicine, out-of-pocket costs, potential financial assistance, and other variables.

Luckily, several major pharmaceutical companies announced this month that their direct-to-consumer advertisements will soon provide instructions for where to find such information.

Let’s hope the Trump administration backs this move instead. Transparency is important — but partial information can often prove more misleading than no information at all. Only when patients know all the facts can they make informed decisions.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top