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Will Including Prescription Drug Prices in Ads Drive Down Prices?

A new rule will soon require most drug ads on TV to state the drug's list price. Here's what the science says about how people will likely react.
Jennifer Boudreaux, co-owner of The Compounding Pharmacy in Shreveport, Louisiana, searches for the generic brand of a drug to fills a customers prescription, on Monday October 21st, 2002.

List prices can be confusing for patients, who in many cases don't pay the full amount because of coupons or insurance.

Starting this summer, when Americans see ads for prescription medications on TV, they'll likely also see the medicine's sticker price, in a sentence displayed at the end of the ad. It'll look something like this:

The list price for a typical course of treatment with Drugoxone is $8,000. If you have health insurance, your cost may be different.

The disclosure is part of a new rule, published last week and set to take effect on July 9th. Officials hope that the rule will help bring down drug prices. "Equipped with information on prescription drug prices, patients will be better able to make informed decisions and demand value from pharmaceutical companies," Seema Verma, the head of the Centers for Medicare and Medicaid Services, said in a statement.

But how will people really react to seeing list prices in drug ads? Will they seek lower-priced options and apply pressure to companies that are charging more?

It turns out it can be hard to answer these questions with data. Only one study has directly examined the possible effects of a policy like this. That study was promising—in it, people were wary of the pricier version of a fictional drug—but, because it's a single study with specific conditions, it's hard to say for sure if that's how most Americans will react to the new rule.

In that study, a team of researchers recruited people online to imagine they had diabetes and to look at one of five ads for a fictional diabetes drug, called "Mayzerium." (In reality, more than 90 percent of the study participants did not have diabetes.) In one ad, there was no mention of Mayzerium's price. In other ads, Mayzerium's price was listed as either $50 a month or $15,500 a month, which represent the low- and high-end list prices for real diabetes drugs. Finally, two ads listed Mayzerium's prices as either $50 or $15,500 and also added the statement: "Eligible patients may be able to get Mayzerium for as little as $0 per month." The study participants filled out a survey ranking how likely they were to ask their doctor about Mayzerium, or to take the medicine.

Seeing a list price of $50 didn't make any difference in whether people wanted to ask about or take Mayzerium. But a list price of $15,500 did. Study participants were 43 percent less likely to want to ask about Mayzerium if it cost that much. However, their interest returned if the ad said that eligible patients could get Mayzerium for free.

Pharmaceutical companies do often offer coupons to patients that heavily discount, or totally pay for, their drugs. But coupons aren't always the best for people, in the long run. "In many cases there are much cheaper alternatives available that are not being advertised to the public," Barbara Mintzes, a drug policy researcher at the University of Sydney in Australia, writes in an email. "The problem with offers of free samples and discounts as well is that [they] can push people to request a medicine that is not necessarily the best option for them and that may cost them more in the longer term, when they're no longer covered by the discount."

While many folks who study drug ads are supportive of the new rule, others worry it could have unintended ill consequences. That's why pharmaceutical economics researcher Alan Lyles, for one, wants to see the rule rolled out in a small part of the United States first, then studied for its effects, before it's applied nationwide. That's not an uncommon strategy for new public-health initiatives, but there's no mention of any pilot programs in the final rule the government published Friday.

Ge Bai, a health-care pricing researcher at Johns Hopkins University who worked on the Mayzerium study, argues that if the government wants its new policy to work as intended, then it should also forbid drug companies from saying in their ads that their medicines could be much cheaper for some. After all, folks in her study remained interested in Mayzerium even if it cost $15,500 a month, so long as the ad also had that "eligible patients" statement. "If our goal is to incentivize drugmakers to modify their price, then we should not allow the modifying language," she says.

Bai acknowledges that "patients might get confused" by list prices: Many people never pay a drug's list price because they have insurance, or because they can get coupons. Still, she thinks the law's benefits outweigh its costs. "It provides important information to patients," she says.

Plus, she adds, "If the price is there, then someone is paying it." She explains: Tens of millions of Americans don't have insurance. Others' plans may not cover their drugs. And even if a drug is covered, its high list price still means the insurance company has to pay it, and may pass that cost on in the form of higher premiums for everyone.

Some researchers fear that patients may react to seeing a high price by incorrectly believing that the costlier drug is better than cheaper counterparts. In one clever study, conducted in 2006, scientists gave study participants sugar pills, but told them they were a new opioid painkiller. The scientists told the participants the pills cost either 10 cents or $2.50 each. Then the scientists subjected the participants to a painful electric shock. (The participants had signed written consent forms beforehand.)

Those participants who thought they'd gotten a $2.50 opioid reported feeling less pain than those who thought they'd taken a 10-cent pill.

Bai's study had actually found that study participants didn't think $15,500 Mayzerium was any better than $50 Mayzerium, but many studies, outside of drugs, have found that higher prices do make people think they're getting a better product. So it's still up in the air whether listing prices might perversely create more demand for more expensive drugs.

Finally, there's the fear that people might see sky-high prices in a drug ad and conclude that they can't afford to get treatment, so they don't go to the doctor at all. Pharmaceutical companies that oppose the new law have used this argument. That doesn't mean it's not a real possibility, says Lyles, who's a professor at the University of Baltimore. The fact that the most expensive, brand-name drugs are most often advertised only exacerbates the problem, as Mintzes writes.

Still, Mintzes also supports the new rule. "This initiative does provide extra information that is useful for people to know," she writes. Just as the officials who wrote the rule are arguing, she, Bai, and others are hoping that, in this case, knowledge is power—to change drug prices nationwide.