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Clinical Laboratories and Pathology Groups

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Federal Judge Blocks New HHS Rule That Would Have Required Pharmaceutical Companies to Include Pricing in Television Ads

Drug companies claim HHS rule violates their first amendment rights, but added web links to drug prices in their TV ads anyway

Will American consumers ever see the prices of their prescription drugs? That almost happened this summer, when a Trump administration healthcare transparency initiative would have required pharmaceutical companies to include prices in drug advertisements. But that requirement was halted by a federal judge one day before it was scheduled to take effect.

The measure, which passed in May, was intended to provide healthcare consumers with price transparency for some prescription medications and help lower prescription costs. However, a federal judge placed the new law on hold citing government over-reach.

This is a significant development for clinical laboratory managers, pathologists, and others watching efforts that will enable patients to see the cost of their medical care in advance of service. Also, few were surprised to learn that this court case was filed by pharmaceutical companies with the goal of preventing prescription drug prices from being disclosed in these advertisements.

HHS Tells Big Pharma to ‘Level with People’ About Drug Costs

Reducing prescription drug prices is a critical issue for healthcare consumers. Therefore, any policy that helps lower costs should provide benefits for both patients as well as the healthcare industry overall. That’s why President Trump signed the initiative that required pharmaceutical companies to include drug prices in television advertisements.

“We are telling drug companies today: You’ve got to level with people [about] what your drugs cost,” Health and Human Services (HHS) Secretary Alex Azar (above) stated after Congress passed the President’s proposal, STATreported. “Put it in the TV ads. Patients have a right to know, and if you’re ashamed of your drug prices, change your drug prices. It’s that simple.” [Photo copyright: Washington Times.]

The controversial proposal, which would have applied to all prescription drugs that cost more than $35 for a one-month supply, was scheduled to go into effect over the summer until it was blocked by Federal Judge Amit Mehta of the US District Court for the District of Columbia.

Judge Mehta ruled that HHS does not have the regulatory power to force pharmaceutical companies to include the prices of prescription drugs in their TV ads and that the agency had violated laws passed by Congress.

“That policy very well could be an effective tool in halting the rising cost of prescription drugs. But no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized,” Mehta wrote in his decision, NPR reported.

Drug companies Amgen (NASDAQ:AMGN), Eli Lilly (NYSE:LLY) and Merck (NYSE:MRK) along with the Association of National Advertisers (ANA) filed lawsuits over the regulation stating it was a violation of their free speech rights. They won the reprieve on July 8, just one day before the regulation would have gone into effect.

Mehta stated in his opinion that the Social Security Act, which HHS used as its basis for the regulation, does not “empower HHS to issue a rule that compels drug manufacturers to disclose list prices,” Fierce Pharma reported.

In August, the Trump administration filed an appeal after the federal judge struck down the regulation. The exact basis for that appeal has not been disclosed. 

Drug Companies Decry New Law as Unconstitutional

Many drug makers are not happy with the rule. Drug industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) believes that mandating drug companies to disclose pricing in TV commercials is a violation of their First Amendment rights, STAT reported.

Nevertheless, PhRMA proposed that pharmaceutical companies provide a web link in their TV advertisements that directs consumers to pricing information online. And some companies also are experimenting with going a step further and voluntarily complying with the original regulation.

In a news release, PhRMA states, “To help patients make more informed healthcare decisions, [PhRMA] member companies today announced their commitment to providing more transparency about medicine costs. PhRMA member companies’ direct-to-consumer (DTC) television advertisements will soon direct patients to information about medicine costs, including the list price of the medicine, out-of-pocket costs, or other context about the potential cost of the medicine and available financial assistance. The biopharmaceutical industry will also launch a new platform that will provide patients, caregivers, and providers with cost and financial assistance information for brand-name medicines, as well as other patient support resources.”

However, Azar said that action is not in compliance with the rule. “They put $4 billion a year into television advertising because the television ad is where people are getting their information, and to point them to the internet would be the equivalent of saying that they should simply be putting their ads on the internet and not running them on TV,” he told the press, STAT reported.

Opponents of the rule noted that actual drug costs for consumers can vary widely depending on coverage and that patients might forgo their medications if they are concerned about the costs, reported Politico following passage of the measure in May.

Critics also claimed that that there were no enforcement mechanisms outlined for companies that did not comply with the ruling, and that it relied on the pharmaceutical industry to police itself. If a particular company failed to include the required information in its TV ads, competitors could file suit against it under the deceptive and unfair trade practice provisions of the Lanham Act, Politico noted.

Solutions to the public’s demand for price transparency in healthcare may be forthcoming. However, at press time, no further information concerning the status of this HHS regulation was available. Dark Daily will continue to monitor the situation and inform readers of any developments.

Meanwhile executives and pathologists at the nation’s clinical laboratories should continue to develop strategies to serve patients who want to know the prices of their medical laboratory tests before they arrive to have their specimens collected.

This summer, several pharma companies may have succeeded in getting a federal court to stop this particular rule to disclose prescription drug prices. But the trend toward price transparency has deep roots and will continue forward.

—JP Schlingman

Related Information:

Drug Makers Will Have to Include Prices in TV Ads as Soon as This Summer

Judge Blocks Trump Rule Requiring Pharma Companies to Disclose Drug Prices in TV Ads

Appeal Shows Trump’s HHS Isn’t Giving Up on Putting Drug Prices in TV Ads

Trump Finalizes Rule to Require Drug Prices in TV Ads

Johnson and Johnson Will List Drug Prices in TV Commercials

PhRMA Members Take New Approach to DTC Television Advertising

What You Need to Know about Putting Drug Prices in TV Ads

Why Putting List Prices in Drug Ads Matters

Copay Accumulators Is a New Tactic in Struggle Between Payers and Pharma at Patients’ Expense

Though patients get a big discount when paying for drugs, copay accumulators prohibit discounts from applying to plan deductibles, extending time it takes for enrollees to reach full plan coverage

There’s a new insurance/payer industry tactic in town and Dark Daily thinks clinical laboratories and anatomic pathology groups should know about it. It’s called a “copay accumulator” and it was designed by payers in response to pharmaceutical company copay assistance cards and discount coupons.

How do Copay Accumulators Work?

Many consumers use manufacturer copay assistance programs, copay cards, and coupons to afford expensive brand-name medications. As payers attempt to make consumers pay a higher portion of drug costs, pharmaceutical companies have responded by offering financial aid to patients in the form of copay assistance cards and coupons. These discounts insulate patients from having to pay the full deductible required by their health insurance plans for medicines prescribed by their doctors.

However, payers say these deductibles were designed to motivate patients to monitor the price of prescribed drugs and discourage the overutilization of costly medicines. A primary goal of price transparency and precision medicine.

The upside to payers is, with a copay accumulator in place, the amount of those manufacturer discounts does not count toward the patient’s insurance deductible. And the longer it takes for patients to reach their deductibles, the longer the insurer gets to collect copays, which adds to the controversy of copay accumulators.

Also, prohibiting drug manufacturer discounts from counting toward a patient’s insurance deductible prolongs the time patients have to wait before full coverage begins. Thus, more upfront costs are shifted to consumers.

“Copay accumulator programs are nothing more than insurance scheme[s] that leave patients financially exposed while benefiting payers’ bottom lines,” Stephen J. Ubl, President and Chief Executive Officer, Pharmaceutical Research and Manufacturers of America (PhRMA), told the LA Times.

Others, however, claim manufacturer discounts are simply marketing schemes used by pharmaceutical companies to keep drug costs high.

“The true issue remains that drug pricing continues to skyrocket, with no clear explanation on how those prices are set,” Cathryn Donaldson, Director of Communications, America’s Health Insurance Plans (AHIP), told the LA Times. “Copay coupon programs hide the true impact of rising prescription drug costs.” (Photo copyright: AHIP.)

Patients Stuck in the Middle

Physicians and patient advisory groups worry that shifting more drug costs to patients may affect therapy adherence and cause confusion for consumers.

“Accumulators are seen as a way to keep manufacturers in line and force them to negotiate better deals,” Randy Vogenberg, PhD, Principal, Institute for Integrated Healthcare (IIH), told Managed Care.

“But the Achilles heel for the pharmacy benefits manager is that you’re hurting the patient, who is stuck in the middle,” continued Vogenberg. “Patients may end up not taking or getting a drug, which is not good for anyone. And it’s not really affecting pricing because patients are still hurting. Unfortunately, it makes the third-party payer look like a crook.”

Managed Care notes that, according to a recent survey of 170 employers conducted by the National Business Group on Health (NBGH), 29% of employers plan on using copay accumulators in 2019. That’s up from the 17% of employers who are currently using them.

“They are not universal yet,” Steve Wojcik, Vice President of Public Policy at the NBGH, told Managed Care. “But they will probably continue to be one tool that employers use to keep costs down.”

Drug Costs Down, Cost to Patients Up

The struggles between payers and big pharma could be heating up. Studies show utilization of copay accumulators may be negatively impacting drug company revenue. Research conducted by Sector and Sovereign (SSR) found that retail drug prices in the United States fell 5.6% during the first quarter of this year. During the same period last year, prices fell just 1.7%. SSR’s report states that most of the decline in prices is due to copay accumulators.

“Unless manufacturers adapt their copay support programs fairly drastically, net price declines may worsen in 2019,” SSR analyst Richard Evans told Reuters.

Clinical laboratories might not directly feel the effects of copay accumulators. Nevertheless, anything that impacts patients’ ability to pay, especially those on high-deductible health plans, should be on the radar of smart lab managers and stakeholders.

—JP Schlingman

Related Information:

Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit

Backlash Against Copay Accumulators

Copay Accumulators: The Deductible Double-Dip

They’re Called ‘Copay Accumulators,’ and They’re a Way Insurers Make You Pay More for Meds

Insurance Tactic Drags Down U.S. Drug Prices in 2nd Quarter

New IOM Report Calls for Tougher Rules on Physician Relations with the Medical Industry

Goal is to address conflict of interest in clinical studies and CME programs

Each year, clinical laboratories and laboratory medicine associations receive less financial support from industry vendors and suppliers. This is a response to tougher Medicare compliance requirements and tighter ethics guidelines. Now comes a report from the Institute of Medicine calling for further reforms on how companies work with physicians to conduct clinical trials and publicize the findings.

The IOM committee’s report, Conflict of Interest in Medical Research, Education and Practice, stresses the importance of preventing bias and mistrust upfront, rather than trying to remedy damage after the fact. It focused specifically on financial conflicts of interest involving pharmaceutical, medical device, and biotechnology companies.