Senators Chuck Grassley and Dick Durbin asked the Government Accountability Office (GAO) to review the relationship between direct-to-consumer (DTC) advertising and Medicare spending, in an attempt to better understand the impact advertising may have on the prices Medicare and its beneficiaries pay for their prescriptions.
In its report, the GAO found that the pharmaceutical industry’s ads may have contributed to increased Medicare Part B and Part D spending. From 2016 through 2018, Medicare and its beneficiaries spent $560 billion on pharmaceutical drugs, with 58% of that being spent on drugs that have DTC advertising mechanisms. In that same time frame, industry spent almost $18 billion ($6 billion annually) on DTC advertising for 553 drugs, with nearly half of those advertising dollars spent on three therapeutic categories of drugs to treat chronic medical conditions (i.e., arthritis, diabetes, depression). A whopping two-thirds of ad spend was centered on 39 drugs, mostly brand-name, and about half of which entered the market at some time between 2014 and 2017.
The GAO report also found that among the top ten drugs with the highest Medicare Part B or Part D spending, four of those were among the top ten drugs in advertising spending in 2018: Eliquis (blood thinner), Humira (arthritis), Keytruda (cancer), and Lyrica (diabetic nerve pain).
The amount spent on advertising product ranged from less than $10,000 per drug to more than $100 million, the GAO said. Humira had the highest amount of ad spending at $1.4 billion, while $913 million was spent to advertise Lyrica and $655 million spent to advertise Trulicity. The report found that manufacturers ramped up spending in advance of a new product launch, or advance in the drug’s development.
The GAO report also found that advertised drugs accounted for only 8% of total Medicare Part D drugs used, but 57% of that spending.
According to the GAO, DTC ads impacted the drugs Medicare patients were prescribed because consumers asked their doctors about the advertised, brand-name drug. It also found drug manufacturer promotions offered to health care providers influenced prescribing decisions, as well.
While the report seems to suggest that advertising is a major factor in a drug’s use and spending amounts by Medicare beneficiaries, the report also notes that other factors likely contribute to those changes, such as increases in unit prices, prescriber decision-making, and promotions directed to prescribers.
In response to the GAO report, Senators Grassley and Durbin have reintroduced the bipartisan Drug-price Transparency for Competition (DTC) Act, which would require pharmaceutical companies to disclose the drug’s price in their advertising. The Senators believe that the spending by Industry raises Medicare costs, saying, “America’s seniors are being targeted with ads for expensive medications without disclosing the price of the drug, then Medicare spending is inflated to the tune of tens of billions of dollars each year.”