'Behind-the-scenes' pricing remains in shadows despite HHS plan

Friday, May 10, 2019
 | 
Chris Woodward (OneNewsNow.com)

prescription drug costsA health policy expert argues that a new federal rule intended to boost transparency of drug prices may actually have the opposite effect and end up creating even more confusion.

The U.S. Department of Health and Human Services (HHS) made a splash this week when it announced a new rule saying drug companies must disclose the list price of a medication in commercial advertisements. In its May 8 announcement, the federal agency notes that drug companies currently are required to disclose the major side effects a drug can have – but not the effect it could have on consumers' wallets.

"If we want to have a real market for drugs, why not have [companies] disclose their prices in the ads, too?," asked HHS Secretary Alex Azar. "Consumers would have much more balanced information, and companies would have a very different set of incentives for setting their prices."

Matthews

But a scholar with the Institute for Policy Innovation says Azar's rule "misses a critical point" if the objective is to make drug prices more transparent for consumers.

"The list price that drug companies would be putting on the TV ads is just simply not what most people pay," says Merrill Matthews, Ph.D., who explains why that's the case.

"Pharmacy benefit managers [PBMs] negotiate significant discounts from the drug companies and then make those available to insurers and pharmacies," he explains. "Insurers also get discounts in there; and then people, if they have health insurance, they often times end up getting a significantly discounted price when they're at the pharmacy.

"So, the list price that might come up [in an ad] just simply is not what the vast majority of people will pay, either through arbitrage or through discounts from insurance."

In an article about the new HHS rule, Matthews states if there's a "silver lining" it would be that the rule might put pressure on major players in the healthcare industry to "reform how products and services are priced, so that list prices are more reflective of what consumers actually play."

In addition to drugs, HHS says it is reviewing comments on a number of other proposed rules to deliver more transparency and fix opaque systems and perverse incentives for a range of items and services.

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