Pharma Companies Will Soon Be Required to List Drug Prices in TV Ads

Pricing disclosure information that was recently introduced at the end of TV ads voluntarily by Johnson & Johnson for its drug Xarelto
Screenshot: Johnson & Johnson/iSpotTV

TV ads for prescription drugs are already annoying as hell, but those drug ads are about to get even more absurd. The U.S. government will soon require pharmaceutical companies to display the price of medications during every commercial.

Alex Azar, the secretary of Health and Human Services, announced the proposed requirement to the Associated Press in an article published this morning, and it could take effect as early as this summer. The goal is to get drug companies to lower drug costs for everybody, but unfortunately, there’s no evidence yet that it will work.

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“What I say to the companies is if you think the cost of your drug will scare people from buying your drugs, then lower your prices,” Azar told the Associated Press. “Transparency for American patients is here.”

Azar, who previously worked as the head of Eli Lilly’s U.S. operations, continued by explaining to the AP that because so much money is spent on TV advertising, that’s “where the patient has the most need of being informed.”

But health professionals in most other developed countries would probably disagree with that assessment and say that the doctor’s office is where a patient should be informed. You say tomato, I say $6 billion a year in direct-to-consumer advertising.

Notably, the U.S. and New Zealand are the only countries in the world that allow TV ads for prescription drugs. And research suggests that advertising only makes consumers believe the drugs work better than they really do. The new government pricing disclosure rule will not apply to print and radio ads.

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The drugs that are most commonly advertised on American TV cost between $535 and $11,000 per month, as the AP points out. But it’s not clear that disclosing the cost of drugs to consumers will do anything to actually push the prices lower, especially since the price provided will only be the list price, and there’s a tremendous amount of variation between list price and out-of-pocket cost after insurance is accounted for.

Most wealthy countries enable their governments to directly negotiate drug prices, which tends to keep out-of-pocket costs reasonable for consumers. But Medicare administrators in the U.S. are prohibited by law from negotiating the price of prescription medications. A recent poll by the Kaiser Family Foundation found that 92 percent of Americans support allowing the federal government to negotiate for lower drug prices.

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The drug companies are supposedly opposed to the new disclosure requirement, which will be published in the Federal Register on May 10 and take effect 60 days after that. The pricing information will have to appear onscreen for four seconds in a 75-second commercial, but won’t need to be read audibly like the side effects announcements that are so often parodied.

Johnson & Johnson even announced in February that it would voluntarily include pricing information on TV for some of its drugs, starting with the popular blood thinner Xarelto. The move by J&J shows that there’s perhaps less resistance to the move by drug companies than they’re admitting, as long as they’re still allowed to push their products on TV.

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As the as-yet-unpublished government rule explains:

A reasonable estimate is that compliance requires 1 percent of the screen space and four seconds of a 75-second commercial. That means that the opportunity cost attributable could be approximately $2.24 million = (1% x 4/75 x $4.2 billion DTC television advertising spending). We note that current DTC television advertisements currently use space to refer patients to their website for additional information, and that same space can include that website and include the list price as a reference (i.e., the advertisements could provide this information in the space that is already dedicated to referring patients to additional information).

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Azar made millions as the head of Eli Lilly before he became HHS Secretary in 2017, according to his financial disclosure forms. And he oversaw price hikes on drugs during a particularly painful time for American consumers. So consider us skeptical that this is the guy who’s going to bring down drug prices for Americans.

The Trump regime keeps saying that they’re going to bring down drug prices through mandated “transparency,” but there’s a much easier way to get those prices down. Simply let the government negotiate prices, like virtually every other wealthy nation in the world.

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About the author

Matt Novak

Matt Novak is the editor of Gizmodo's Paleofuture blog