The WasteWatcher: The Staff Blog of Citizens Against Government Waste

New HHS Transparency Regulation Mandates Inaccurate Information

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


The Pharmaceutical Research Manufacturers Association (PhRMA), the trade association that represents the nation’s leading biopharmaceutical research companies, announced a new proposal on Monday regarding direct-to-consumer (DTC) television advertising.  This voluntary agreement by PhRMA members would help patients access more useful information about the cost of their medicines.

In 2006, the association adopted a series of tenets, “Guiding Principles on Direct-to-Consumer Advertisements About Prescription Medicines.”  The new proposal states, “All DTC television advertising that identifies a medicine by name should include direction as to where patients can find information about the cost of the medicine, such as a company-developed website, including the list price and average, estimated, or typical patient out-of-pocket costs, or other context about the potential cost of the medicine.”  These revised principles are due to become effective on April 15, 2019.

Hours later, Health and Human Services Secretary Alex Azar announced a proposed regulation that would flip the voluntary approach into a meaningless and mandatory one.  In a speech before the National Academy of Medicine, Secretary Azar said, “We are proposing to require American drug companies, for the first time ever, to include in their TV advertising the list price of any drug paid for by Medicare or Medicaid.  Patients deserve to know what a given drug could cost when they’re being told about the benefits and risks it may have.  They deserve to know if the drug company has pushed their prices to abusive levels.  And they deserve to know this every time they see a drug advertised to them on TV.”

This proposal would run contrary to the deregulatory achievements of the Trump administration, which have saved $23 billion from 176 actions in fiscal year 2018.  Indeed, it could undermine this impressive progress by reversing the growth of government controls over industry and the economy that were rampant throughout the Obama administration.

Citizens Against Government Waste (CAGW) agrees that every consumer should know what they will pay for their drugs at the pharmacy counter.  But, the list price, or wholesale acquisition cost (WAC), is not what most people will pay.

Secretary Azar pointed out that HHS’s proposed rule is like what happened 60 years when action was taken to force car manufacturers to post their sticker prices.  At that time, automobile manufacturers protested, claiming the sticker prices were not what most people would pay and that the prices were not meaningful.

There is a big difference between buying a car and prescription drugs.  Car buyers are responsible for paying 100 percent of the cost.  They will likely have a loan, but they are still paying for the car.  And privately-run services such as CarFax, Consumer Reports, Edmunds, and TrueCar provide more realistic pricing than the sticker price.

With prescription medicines, price negotiations occur among pharmaceutical manufacturers, insurers, pharmacy benefit managers, employers, wholesalers, and pharmacists.  Ultimately, the patient pays what has been negotiated among some or all these players, who are involved with the patient’s health insurance policy or other agreements, not the list price.  Even consumers who have a Health Savings Account and a high deductible will find prices for many healthcare items and services have been negotiated for them on their behalf.

The HHS rule will require television advertisements for prescription drug and biological products paid for by Medicare and Medicaid to include the list price, or WAC, if it is greater than $35 for a month’s supply or a course of therapy.  According to HHS, the 10 most commonly advertised drugs have list prices ranging from $535 to $11,000 per month or usual course of therapy.  The WAC will be “conveyed in a legible textual statement at the end of the advertisement, meaning that it is placed appropriately and is presented against a contrasting background for sufficient duration and in a size and style of font that allows the information to be read easily.”

The HHS proposal is “forced speech” and will not get at the root of the problem pharmaceutical cost problem, which is a distorted pharmaceutical marketplace due to price controls.

Medicaid, the VA, the 340B drug discount program, and other government programs use price controls, not markets, to bring down drug costs.  Even Medicare Part D, which uses the private sector to negotiate prices and distribute prescription drugs, is slowly being throttled and changed into a government-run plan.  Congress instituted price controls in Medicare Part D’s coverage gap, more commonly called the donut hole, when the Patient Protection and Affordable Care Act (ACA), better known as Obamacare, required pharmaceutical companies to provide a 50 percent discount.  This year, the Republican-led Congress, which should know better, doubled down by requiring a 70 percent discount, making Part D act less like a private drug benefit insurance plan and more like Medicaid.

HHS is encroaching into Part D negotiations to control costs, essentially ignoring the “non-interference clause” that made Medicare Part D one of the most successful government-created programs that cost far less than originally predicted.

This does not mean reforms should not be instituted when it comes to drug prices. For example, CAGW approved of removing the “gag clause” that prevented pharmacists from disclosing cheaper options to consumers. 

Under PhRMA’s proposal, consumers will have more transparency and be guided to more comprehensive pricing information.  This private, market-driven policy should be given an opportunity to go into effect before the government considers any further intervention or control over advertising and pricing.

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