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Question of the Week — Pricing information in prescription ads on television?

Posted  November 2, 2018

The Centers for Medicare & Medicaid Services has proposed a rule that requires the list price (or, “wholesale acquisition cost”) to appear clearly in television ads for prescription drugs and biologics. The CMS reasons that by ensuring that Medicare and Medicaid patients receive cost information, patients can make more informed decisions that will save them money. For example, co-insurance for some high cost drugs requires the patient to pay a percentage of the list price rather than a fixed dollar copayment, but sometimes patients don’t know their out-of-pocket obligation when choosing a prescription.

According to CMS, consumers also don’t realize that out-of-pocket costs vary greatly depending on their prescription drug benefit. Insurance companies and Pharmacy Benefit Managers leverage beneficiaries’ high deductibles, copayments, and coinsurance to negotiate their own lower purchasing costs, sometimes even lower than list price. Such “market-distorting effects” mean pharmaceutical companies don’t compete based on list price. Transparency, says CMS, should promote competition and slow down the dramatic increase in drug prices.

Prescription drug companies worry that the rule infringes upon their first amendment rights in promoting their products and that better alternatives for consumers to receive pricing information are available. They are concerned that list price information may interfere with healthcare decision making and confuse patients because the prices don’t have a clear relation to the ultimate patient cost.

The CMS has asked for comments, including whether compliance with the rule should be a “condition of payment” from Medicare and Medicaid. Companies that violate “conditions of payments” can sometimes be liable for submitting fraudulent healthcare claims under the False Claims Act.

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