How the Prescription Drug Price Problem Might Get Even Worse

May 24, 2019
By Naomi Lopez Bauman and Timothy Sandefur

There’s strong bipartisan support today for doing something about prescription-drug costs. Unfortunately, a deceptively simple new regulation that the Trump administration rolled out earlier this month will likely make things worse.

Beginning this summer, drugmakers will be required to state the prices for their medicines in all direct-to-consumer TV advertisements — an idea that sounds wise, until you learn that in practice, the information provided is meaningless at best and inaccurate at worst.

The rule requires drug manufacturers participating in Medicare and Medicaid to disclose the “wholesale list price” of either a 30-day or “typical” regimen whenever they run television ads for their medicines (unless that price is under $35). The price will be followed by the statement “if you have health insurance that covers drugs, your cost may be different.”

The problem is that drug manufacturers do not set the prices consumers pay. Instead, middlemen buy these drugs in bulk with discounts and rebates. These middlemen then sell to retailers, with another round of rebates and reductions. As a result the “wholesale list price” that the regulation forces manufacturers to provide in their ads doesn’t actually exist.

Read the full op-ed at National Review Online.

Naomi Lopez Bauman is the Director of Healthcare Policy and Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.