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Remarks on Requiring List Prices in Drug Ads

Alex M. Azar II
May 8, 2019
Washington, D.C.

If there’s one thing I want you to remember about the action we took today, it’s that requiring drug companies to level with American patients about their prices is about working toward a system where the patient—not the insurer, not the drug company, but the patient—is the one in control of your healthcare.

As Prepared for Delivery

Good morning, everyone, and thank you for joining us to hear about today’s important announcement.

One year ago this coming Saturday, President Trump and I stood in the Rose Garden—a very warm Rose Garden—to announce his American Patients First prescription drug pricing blueprint.

The blueprint sent a clear message to prescription drug manufacturers and all the other players in this industry: This system is not going to last. Drug prices have to come down, and the way you do business must change.

That was 362 days ago. Since then, under President Trump, we have seen more change in American prescription drug markets than we have ever seen under any president.

This morning, we finalized one of those significant changes. Starting 60 days from when this rule is published in the Federal Register, drug manufacturers’ television ads will be required to include the list prices of any drug covered by Medicare with a cost of $35 or more per month or course of treatment.

I want to briefly discuss why we feel this step is so important, and how it fits into our broader vision for changes to prescription drug markets and healthcare.

Putting prices in TV ads may be the most significant single step any administration has ever taken toward this very clear commitment: Patients have a right to know the price of the healthcare they receive, before they receive it.

Let’s step back and consider how drug companies advertise today. One very commonly advertised drug, for plaque psoriasis, has a list price of $3,400 a month. It’s only covered by one of the 25 standalone Medicare Part D plans available here in Washington, D.C.

What kind of pricing information does its manufacturer include in their advertisements today? Their ads tell you to ask them about the possibility of a $0 co-pay.

What are you actually going to owe if you ask your doctor to prescribe it to you? Who knows.

Now, if you’re one of the people living around D.C. on the plan that covers this drug, you may well have access to it at a price much lower than $3,400 a month.

That is why the industry often claims that list prices, the prices we’re requiring them to put in their ads, aren’t real prices.

But for the vast majority of the people with Part D living around D.C., the list price is the real price.

And for the 47 percent of Americans with high-deductible health plans, the price they’ll see in ads essentially is the price, until they hit their deductible. Other patients, especially when they need expensive drugs, will be responsible for a percentage of the list price, as coinsurance.

In other words, the vast majority of Americans struggling to afford their drugs are put in that position because they’re paying based on high list prices.

Claiming list prices don’t matter is almost the same as claiming there is no problem with high drug costs at all—and I don’t think many American seniors or patients with serious illnesses would say that’s the case.

The information we are requiring in ads is just one piece of the cost picture, and we believe it can be a starting point. Johnson and Johnson has taken the lead and begun including the list price, alongside other cost information, in one of its drug ads.

This can empower patients with information before they walk into the doctor’s office, where they can make a decision with their physician about what is right for them.

Once you get to the doctor’s office, and eventually the pharmacy, we’re making sure you have more information at your fingertips. Through other regulation, we’ve proposed that every Part D plan be required to offer a tool that can provide doctors and patients with information about coverage and out-of-pocket costs in real time.

Now, we all would like the conversations we have with our doctors to be totally free of any discussion about cost. But the ability to have that conversation about cost is what puts each one of us, as the patient, in control.

There are only two alternatives: One, some bureaucrat in Washington—maybe me!—has that discussion about price and decides what drug is covered, long before the patient ever gets a say.

Or two, you don’t hear anything about the price until you get to the pharmacy counter, where you’re faced with a massive bill, wondering whether your doctor could have found you a more affordable option.

We believe today’s step on transparency will help make prices in healthcare work much more like they in any other market—not utterly uniform, but more predictable and more competitive.

A related problem in today’s drug market is the system of drug rebates, which are passed around a labyrinthine drug pricing system rather than going directly to patients. In Medicare Part D, we’ve proposed replacing today’s system, which involved $29 billion in rebates last year, with a requirement that all negotiated drug discounts go to patients.

This change will substantially diminish the incentive for sky-high list prices, making the new advertising rules that much more useful. List prices already matter to patients—but in a truly competitive drug market, without today’s broken rebate system, they’ll be even clearer signals.

When we introduced the President’s blueprint last May, there were some skeptics. It’s just a bunch of ideas, some said. Someone even made fun of how many question marks there were in the blueprint itself.

Now, about a year to the day from that announcement, we finalized this rule, and we’ve put forth proposals for every major idea we laid out that day. Those question marks are turning into check marks.

We will continue to drive action on each strategy we laid out in the President’s blueprint: increasing competition, improving negotiation, creating incentives for lower list prices, and lowering out-of-pocket costs.

We said we were going to boost competition by cracking down on shenanigans that block generic competition, and we did. We said we were going to bring new negotiation tools to Medicare, and we did. We said we were going to put list prices in TV ads, and we did. We said we were going to lower patients’ out of pocket costs, and we did, with record numbers of low-cost generic drugs and an end to pharmacy gag clauses. We’ve now seen manufacturers’ behavior change significantly, with one measure of drug price inflation going negative in 2018 for the first time in 46 years.

Drug pricing is just part of a much broader vision that the Trump administration is delivering for American patients.

If there’s one thing I want you to remember about the action we took today, it’s that requiring drug companies to level with American patients about their prices is about working toward a system where the patient—not the insurer, not the drug company, not the government, but the patient—is the one in control of her healthcare.

We’re moving from a system where patients are left in the dark to where patients are put in the driver’s seat. That’s the kind of healthcare system that will deliver the affordability Americans need, the options and control they want, and the quality they deserve.

So thank you all for calling in today, and I’m now happy to take some questions.

Content created by Speechwriting and Editorial Division 
Content last reviewed on May 8, 2019