"Knowing what something costs before buying it is just common sense." That's how Sen. Chuck Grassley, R-Iowa, justified a bill he introduced in January to require drug companies to include a medicine's list price in their advertisements.
Unfortunately, his Drug-price Transparency for Consumers, or DTC, Act — co-sponsored by Sen. Dick Durbin, D-Ill. — would only make drug prices more confusing for consumers.
And it would draw attention away from the middlemen in the drug supply chain who are responsible for escalating costs at the pharmacy.
The bill would order pharmaceutical companies to include a drug's "list price" in their ads.
That may seem like a commonsense way to inject some transparency into the prescription drug market.
But the "list price" is not what most patients pay at the pharmacy counter.
It isn't even the price that insurers pay.
Rather, a medicine's list price is just a jumping-off point for negotiations between insurers, middlemen known as pharmacy benefit managers, and drug companies.
PBMs generally demand steep discounts and rebates from drug makers in exchange for prime placement on the formularies, or lists of covered drugs, they put together for insurers.
Consequently, a drug's list price tends to be much higher than the discounted "net" price that its maker eventually receives. In 2023, manufacturers granted rebates, discounts, and other reductions totaling $334 billion.
Even a medicine's net price may not be a good measure of what patients can expect to pay — not least because individual's out-of-pocket cost for a drug will depend on the particulars of their health plan.
None of these complexities is easily conveyed in a 30-second television spot.
So, a law that forces pharmaceutical companies to state a list price that most people will never pay will only serve to confuse patients.
And it would do so while obscuring the role that PBMs play in determining what people pay for prescription drugs.
The billions in discounts, rebates, and savings that PBMs secure from manufacturers rarely make their way to patients at the pharmacy counter.
Instead, PBMs and insurers use some of them to reduce overall premiums — and keep some for themselves.
There are multiple reasons why PBMs have gotten away with this kind of behavior for so long. For one, they have a lot of market power. Research from the Federal Trade Commission (FTC) shows that the three largest PBMs processed nearly 80% of prescriptions dispensed through pharmacies in 2023.
PBMs have also been able to operate largely in secret.
Not only do most Americans have little idea what these firms actually do — they're unaware of the discounted prices that PBMs have negotiated for their insurer clients.
A genuine legislative push for drug price transparency would drag these dealings out into the light. It might require insurers and PBMs to reveal the net price they negotiate for a drug — and insist that patients share in any savings when they pick up their prescriptions.
Grassley and Durbin's DTC Act doesn't demand anything of PBMs.
If anything, it turns a blind eye to the dysfunction they've inflicted on the prescription drug market.
Drug ads may annoy some couch potatoes.
But they nudge others to get health problems checked.
For some patients, they may be the catalyst that helps them get a chronic condition under control — and buys them more time with their loved ones.
The DTC Act won't bring down drug prices.
It will simply mislead people about what they'll truly pay for their medicines.
And it could discourage people from seeking out treatments that could help them.
That's hardly "common sense."
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It." Follow her on X@sallypipes. Read Sally Pipes' Reports — More Here.
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