Pros and Cons of DTC Drug Ads

 

What may seem obvious to you can be wrong. I was reminded of that recently when I had dinner with a friend who reads my blog. (Drug Ads Disservice to Patients and Doctors) We both agreed that direct-to-consumer (DTC) drug ads didn’t seem effective. We marveled that the pharmaceutical companies were pouring so much money into these ads that we didn’t think were a good investment of their advertising dollars.

Then my friend did some research and pointed me to a web site called ProCon.org. They have a running debate format that included this issue in a recent survey. Some strong arguments were made, both Pro and Con, but the most startling discovery was that “For every $1 spent on DTC ads, sales of prescription drugs rose by $4.20.”

If that statement is even close to accurate we’d all better brace ourselves for more of these DTC ads in the future! In fact, Kantar Media, a firm that tracks multimedia advertising, says 771,368 such ads were shown in 2016, the last full year for which data is available. That was a 65% increase over 2012 figures.

Most of us probably react negatively to the endless list of side effects the FDA mandates these ads mention. But an unexpected reaction to these is enhanced credibility. Those who have the disease mentioned tend to think the heavy dose of negative information increases the perceived honesty of the ads.

Here is a sample of the arguments made, both Pro and Con, for DTC drug ads:

Pros for DTC Drug Ads

  • 64% of physicians surveyed believe ads encourage patients to contact a doctor
  • Lower income/education patients were more likely to see a doctor
  • 73% of physicians thought patients asked good questions because of the ads
  • 77% of people believe the ads increase awareness of new drugs
  • 81% of physicians thought ads had a positive impact on patient compliance
  • 88% of physicians said patients ask about drugs for conditions they have
  • 52% of physicians agree the ads help remove stigma associated with diseases
  • 44% of patients believe the ads help educate them about drugs and disease
  • DTC ads protect free speech of drug companies

 

Cons for DTC Drug Ads

  • 63% of physicians believe DTC drug ads misinform patients
  • 74% of physicians believe the ads overemphasized the benefits of the drugs
  • 84% of regulatory letters sent by the FDA were for minimizing risks and /or exaggerating effectiveness of drugs.
  • 68% of physicians agree that drugs are marketed before safety profiles are known
  • 43% of consumers believe drugs had to be 100% safe before being advertised
  • DTC ads create the idea that normal conditions are “bad.”
  • 81% of physicians say the ads promote drug overutilization
  • 80% of physicians say drug ads weaken doctor-patient relationships.
  • 78% of physicians believe drug ads increase healthcare costs.
  • 57% of U.S. adults support removing prescription drug ads from TV.

 

Notice that roughly the same percentage of doctors believe drug ads encourage patients to contact a doctor – but misinform the patients! Likewise, about the same percentage believe drugs ads increase awareness of new drugs – but overemphasize the benefits of those drugs.

Perhaps the strongest benefit for patients is that more patients seek medical care as a result of these ads. Perhaps the most adverse impact of these ads is that they weaken the doctor-patient relationship.

The United States and New Zealand are the only countries that permit DTC prescription drug ads. All other countries ban all forms of DTC prescription drug ads except Canada, which allows limited forms of reminder ads. The U.S. accounts for 42% of global prescription drug use even though our population is only 5% of the world. This certainly reflects differences in standard of living and the structure of our reimbursement system, but may also be influenced by DTC drug ads.  The World Health Organization (WHO) stated in 2000, “Advertisements to the general public should . . . not generally be permitted for prescription drugs,” and in 2007 “made a unanimous recommendation to prohibit direct-to-consumer advertising.”

Clearly most of the world believes these DTC prescription drug ads are a bad idea. But as long as drug companies are getting a return on investment of $4.20 for every dollar spent we’re going to see more of these ads, unless the government bans them.

Where do you stand? Are these DTC drug ads a good thing or a bad thing? Let me know what you believe.

Trump’s Plan to Lower Drug Prices – Part II

In Part I, we talked about the Trump proposals to lower drug prices. Avik Roy, healthcare economist writing in Forbes, says these proposals will go a long way toward lowering drug prices.

But Roy also says there is more that could be done. He has some criticisms of the Trump plan – and some suggestions on how to do more.

He says the Trump plan blueprint complains a lot about “high list prices for drugs” but worries that the real problem is the actual price, net of rebates and wholesaler discounts. Getting the net price down should be the real focus of the plan.

He also says the blueprint complains about “high and rising out-of-pocket costs for consumers.” This is certainly a concern, but rising insurance premiums is also a problem. The blueprint advocates measures that will cap out-of-pocket costs for seniors, but result in driving up Part D premiums and taxpayer spending on Medicare drugs.

Lastly, Roy says this is an over-emphasis on the idea that “foreign governments are free-riding off of American investment in innovation.” This refers to the fact that drugs can be purchased for less in foreign countries. The drug companies have long justified these differences by claiming that it is necessary to pay for the high cost of research and development of new drugs. Roy points out that drug companies are still making money off the sales of these drugs in other countries – it’s not charity!

What More Can Be Done?

The Trump plan proposals are a great step in the right direction, but more can be done. The key is competition – which always lowers prices and improves quality.

To improve competition some things must change. Where there is only one drug available to treat a particular disease, drug companies exploit this monopoly with irrational pricing. The Trump plan addresses this problem by capping growth of Part B drug prices at consumer inflation (CPI). Roy offers these other ideas:

  • Creating a safe harbor for private insures to jointly negotiate drug prices with a monopoly manufacturer in a given state. (a Swiss idea)
  • Eliminating requirements that force Medicare to pay for all FDA-approved drugs (open formularies)
  • Allowing the FDA to fast-track drugs that would compete with established monopolies
  • Allowing pharmacies to import a drug from other countries – if the manufacturer of an off-patent, monopoly drug takes a double-digit price increase.

 

We all want lower prices for needed drugs – and we want the best of research and development to find innovative new drugs. Until now we have been told that we can’t have both. It’s time to try these new proposals and find out if that’s a false choice.

Trump’s Plan to Lower Drug Prices – Part I

 

We’ve been talking about lowering the high cost of prescription drugs lately. (Lowering Drug Costs) Now President Trump has weighed in with his plan to tackle this difficult, but important problem.

Avik Roy, writing for Forbes, says, “The Trump plan, if enacted, represents a sea change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”

As usual, the mainstream media has already taken it upon themselves to attack anything coming out of this White House. One of their criticisms is that the new plan will achieve little, because it doesn’t ask Medicare to directly negotiate drug prices.

Roy says this is a bogus claim – because Medicare already negotiates drug prices. It has been doing so since the enactment of Part D in 2003. The Congressional Budget Office (CBO) said this in a 2014 report: “The competitive structure of Part D gives plan sponsors significant incentive to hold down spending. . . sponsors use three main approaches: They encourage the use of less-expensive brand-name drugs, they negotiate lower prices for brand-name drugs, and they encourage the use of generic drugs.”

The proof of this negotiation process is the track record of Part D spending which has come massively under budget, representing the most successful cost-control experiment in Medicare’s history. Figure 8 below depicts this history:

Roy gives us insights into the political history of Medicare Part D. When it was enacted in 2003, people on the left complained that it administered the program through private insurers and pharmacy benefit managers (PBMs). They wanted Part D to be a government-run, single-payer program, and have pushed for this change ever since. That’s what the media refers to when speaking of “direct” negotiation of drug prices. But even the non-partisan CBO has repeatedly evaluated this idea and concluded that the effect would be “limited” and “modest” because Part D plans already negotiate on Medicare’s behalf.

The Trump Plan

The Trump plan, called American Patients First has two categories of reform:

  • Unilateral changes the administration can do
  • Congressional changes that are needed

 

Here are the Trump proposals:

  • Limiting the growth of Medicare payments for drugs in the doctors’ office to consumer inflation (CPI) – Roy says this will save billions over time by limiting the ability of drug companies to raise prices on old drugs.
  • Shifting drugs out of Part B to Part D – to subject more drugs to negotiation.
  • Rolling back mandates that force Medicare to keep costly drugs on its formularies – regardless of their value.
  • Reforming the FDA’s internal procedures – in order to reduce artificial barriers to generic competition.
  • Promoting the use of biosimilars – and reducing barriers to their take-up.
  • Preventing branded drug manufacturers from gaming FDA risk management strategies and 180-day generic launch rules – to forestall generic competition.
  • Providing avenues for Medicare to bulk-purchase costly drugs – so as to limit the pricing power of monopolies.
  • Requiring drug rebates negotiated by PBMs to be passed directly on to the patients – instead of being used to reduce premiums for all policyholders. This should incentivize more and wider use of rebates, because price-sensitive consumers will benefit from lower prices on the drugs they use.
  • Requiring drug companies to disclose list prices – in their drug ads on television, just as they do for side effects and risks. This will lower prices since drug companies will risk a PR blowback if prices are too high.

 

These proposals are a great start, but more could be done. We’ll talk about that in my next post in Part II.