The Prescription Drug Price Transparency Ruling and Its Impact On Pharma Marketers

On May 8, The Centers for Medicare & Medicaid Services (CMS) announced a final Price Transparency Rule that will require pharmaceutical brands to include the list price of their drugs at or above $35/month and covered by Medicare or Medicaid in all direct-to-consumer (DTC) TV ads. Just 60 days after its publication in the Federal Register, the rule will take effect on July 9 and require advertisers to work quickly to alter any of their advertisements not in compliance.

Aimed at increasing transparency for patients and bringing down overall drug costs both for patients and the Medicare and Medicaid programs, the current administration released the American Patients First Blueprint last May, calling for the US Department for Health & Human Services (HHS) to consider requiring the inclusion of list prices in DTC TV ads.

While the HSS believes this new legislation will lead to lower costs and provide more transparency, the pharma industry cited concerns that just including list prices in these advertisements is not sufficient and could discourage patients from seeking needed medical care.

One thing is certain, consumers are changing the way they manage their health and pharma advertisers are responding in big ways.

Efforts Are Being Made To Address Transparency About Medicine Costs

• Last October, the trade group PhRMA announced their initiative requiring member companies’ DTC tv ads to include direction 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 information about the potential cost of the medicine.
• In January, Eli Lilly became the first company to follow the PhRMA initiative when they released their TV commercial for Trulicity containing information that directed viewers to a website outlining the drug’s list price, estimated out-of-pocket costs for patients and information about the patient assistance program.
• In April, prior to the CMS’ final rule, Johnson & Johnson vowed to begin including list prices in its television advertisements and in March, the company’s anticoagulant Xarelto became the subject of the first TV drug ad to include list price.
• On May 8, PhRMA announced the launch of the Medicine Assistance Tool, or MAT, which contains links to the websites referenced in company DTC television advertising, a search tool to help patients connect to financial assistance programs and resources to help patients navigate their insurance coverage.

Many Pharma DTC TV Ads Will Also Include Typical Out-of-Pocket Costs

• Many believe the ruling’s requirement to state the list price or wholesale acquisition cost (WAC) of drugs, can be very misleading and rarely represents the actual cost to patients.
• A study by the Journal of the American Medical Association found consumer interest in a drug was not affected by a high sticker price when a typical out-of-pocket cost of $0 was also shown.
• In an effort to decrease confusion, many pharmaceutical advertisers will opt to also include typical out-of-pocket costs, not required by the ruling, in their ads.
• If pharma advertisers find that ads touting affordability perform well, we may see a shift towards messaging focusing on patient savings and payment assistance.

Pharma DTC Ad Spending Is Rising

• The pharmaceutical industry is pouring billions into new TV and print campaigns. Ad spending soared more than 60 percent in the last four years, hitting $5.2 billion last year
• Nine prescription drugs are on pace to break $100 million worth of TV ad time this year/
• 94% of pharma respondents in a recent study reported increased their annual marketing budgets this year, with an average budget of $11.5 million – that’s up 29.2% year over year.

Traditional Tactics Are Still Important For An Effective Marketing Mix

• A recent healthcare study found:
  • 86% of respondents reported using digital marketing (digital ads/websites/mobile and tablet apps/social media) to reach their audience
  • 77% reported using traditional marketing (print/outdoors/TV/radio) to reach the same audience
• In 2018, TVs had a 96% penetration rate in US homes, according to research from CTA, and are not expected to fade away anytime soon.
• The continued investment and excitement around TV technology has resulted in TV’s becoming “smarter” and equipped with voice assistants and built-in high-speed internet that enables them to communicate with other home and mobile devices. This technology will create new opportunities for advertisers to reach their audience.

• “If you’re a pharma company, and you want to reach a lot of people quickly … there’s really no better place to go still than the traditional networks,” said Timothy Calkins, a marketing professor at Northwestern University’s Kellogg School of Management.

Pharmaceutical Marketers Should Prepare For More Changes

• With the ever-increasing efforts to control transparencies around pharma pricing and profits, regardless of who is in power, more changes are imminent and marketers should stay ahead of impending regulations and their budgets.
• The CBO Report released on May 2 concluded The Price Transparency Ruling would prohibit pharmacy benefit managers from receiving rebates from manufacturers on prescription drugs and many have raised concerns that prohibiting rebates will most likely raise, not lower, the total cost of pharmaceuticals.
• CMS will keep a public online list of drugs and companies that do not comply with the ruling and to be in compliance, advertisers must be sure the prices in TV ads are accurate for the quarter in which the spot is airing.
• Since the pricing focus is on branded TV ads, there is potential for a shift toward unbranded campaigns and marketers may look at re-allocating budgets away from TV.
  • “It’s very unusual that it wasn’t changed [to include print and digital ads]. My read is that HHS was taking the simplest path. They wanted to get some regulation on the books so they could claim victory and move on,” stated Joe Bigelow, Executive Director of The Coalition for Healthcare Communication in response to the ruling.