Senate Moves Forward With Drug Price Transparency Amendment

The Senate has passed a spending bill with a bipartisan amendment, sponsored by Senators Chuck Grassley, R-Iowa, and Dick Durbin, D-Illinois, that will provide HHS with $1 million in funds to issue regulations on direct-to-consumer advertising. The regulations will require drug makers to include the prices of their products in direct-to-consumer advertisements.

Grassley, in a statement on his website, said “In their ads, these companies educate consumers on new drugs and their side effects. This bill goes one step further by educating the public on pricing.” Added Durbin, “More information gives transparency to the transaction, and will help give American consumers a break and start to slow down the skyrocketing cost of prescription drugs.”

The amendment follows HHS Secretary Alex Azar’s suggestion, in speaking about HHS’ “American Patients First” blueprint to lower drug prices in May 2018, that such a requirement in advertising could help create a “real market for drugs” by providing an incentive for companies to reduce their prices. Azar said in subsequent congressional testimony that the administration’s proposal to require disclosure of list prices in direct-to-consumer advertising would likely be achievable through HHS’ existing ability to craft regulation, but added that he would welcome congressional action to reinforce HHS’ authority in this area.

The amendment’s passage came shortly after receipt of a CMS proposed rule, “Regulation to Require Drug Pricing Transparency,” at the Office of Information and Regulatory Affairs. The text of the proposed rule is not yet publicly available.

Click to read more about the Trump administration's proposals to reduce drug prices.

The broadly popular amendment appears to resonate with public opinion on drug price transparency. The Kaiser Family Foundation found in a June 2018 poll that 76% of Americans (83% of Democrats, 73% of independents, and 72% of Republicans) favor a federal requirement for drug advertisements to include information about how much a drug costs.

However, questions remain about what price information consumers will see and hear in advertising. Currently available information on the Durbin-Grassley Amendment does not stipulate how drug prices would be calculated for disclosure in advertising, and that is a fact that may leave room for confusion.

According a presentation prepared by Jack Hoadley, PhD, for the Bipartisan Policy Center in 2016, there is no single price of a drug in the US healthcare system. For example, a drug’s wholesale acquisition cost, which is defined as the list price posted by manufacturers to customers, may not be the same as the average manufacturer price, which is defined as the average of prices that are actually paid by wholesalers and retailers who buy products from manufacturers directly. Furthermore, the average sales price—which is the average amount of money realized by manufacturers after all rebates to pharmacy benefit managers, discounts, and price concessions have been made—may also represent a different sum.

None of those measurements of drug price is likely to be the price paid by a typical patient whose out-of-pocket costs will vary by the type of insurance coverage they have. That fact raises the question of how useful price disclosures will be to consumers.