Azar deals woe to DTC—and a slap to Big Pharma—with vow to force prices into drug ads

Pharma might have thought it could fend off the Trump administration's bid to get drug prices into consumer advertising, but it was wrong.

Even a last-ditch set of concessions—announced by PhRMA Monday morning—couldn't forestall HHS Secretary Alex Azar's own proposal Monday afternoon. The pharma plan was "a small step," Azar said, before saying he'd require DTC television ads to include the list price on all $35-and-up drugs covered by Medicare or Medicaid, which is essentially every drug in the pharmaceutical universe.

And Azar didn't just counter. He took direct aim at the just-announced PhRMA idea. 

“It is no coincidence that the industry announced a new initiative today that will help make price and cost information more accessible,” he said via CSPAN video. “We appreciate their effort, but placing information on a website is not the same as putting it right in an ad. And it’s taken them five months since the president’s blueprint to start skating to where the puck is going.”

The pharma companies had come together, in anticipation of an HHS move, with a plan to direct viewers of TV commercials to more information about medicine costs, including list prices and typical out-of-pocket costs.

RELATED: Satan, holy water and pharma ads: Senators get fiery in push to pass DTC price tag rule

But while Azar did call PhRMA's plan a “helpful complement,” he said the administration will not back down on drug pricing directly in ads—or on delivering transparency in other areas. Azar pointed specifically to rebates, calling them unnecessary in a strong negotiating ecosystem and advocated  fixed-price, upfront discounts as a potential replacement.

He offered a promise on rebates as well: “Players in the market can begin to shift now or, as on advertising, we have the power to redesign the system for them.”

Azar announced the administration’s decision at a National Academy of Medicine meeting, in a speech that ranged from stern to sarcastic to scornful. For now, the rule will apply to TV only, and the notice needs only to be displayed legibly onscreen, not spoken. So far the only enforcement would be HHS compiling a list of offenders.

He didn't say exactly how the administration plans to force pharma’s hand. As for free-speech questions, senior health officials argued the measure is constitutional, under the Supreme Court’s support of governmental authority to make sure consumers get accurate information, according to the Washington Post.

RELATED: Price check at FDA: Trump pushes for pharma ads with dollar signs

Congress so far has been ineffective on the issue; the Senate passed a recent amendment that would have pushed drug pricing in ads forward, only to see it voted down last month in the House.

The proposal will be opened up to a 60-day comment period, and groups are already lining up to weigh in publicly. Trade association and lobbyists for pharmacy benefit managers (PCMA), insurers (AHIP) and physicians (AMA) issued statements praising the HHS' new push forward on the drug pricing requirement.

But one of the groups that will go on record against the proposal is the Association of National Advertisers.

“Despite their arguments that there are no First Amendment issues, we do not agree with that. There are substantial First Amendment issues,” Dan Jaffe, head of ANA's government relations office, said in a Tuesday interview. “It is far from clear that this information will further a substantial government issue nor is it clear they are overcoming any sort of deception in the advertising.”

Jaffe said ANA will wait for the outcome after the 60-day comment period, but did not rule out legal action if the government tries to moves from proposal to rule-making.

PhRMA, for its part, maintains that a drug's list price alone will confuse consumers, who typically don’t end up paying that price themselves. The association also pointed to pharma executives' positive commentary about its own agreed-upon plan to link drug pricing information to ads.

Victoria Summers, ZS associate principal, said the problem she sees with the HHS proposal is that it's just one measure targeted at one industry, rather than an attempt to work on drug-cost problems as a whole.

“I was hoping this would be part of a bigger step,” she said. “If you’re going to go down this path, you can’t declare victory by just making prices transparent, and that’s what it sounded like," she said. "There are cost issues absolutely, but they are affordability issues, not necessarily pricing issues.”

She was more interested in PhRMA's proposal to partner with advocacy groups on an online patient affordability platform, because, she said, it would allow patients to search for the cost of drugs as well as insurance coverage, co-payment costs and other options.

The HHS plan is sure to get pushback from not only the pharma industry and the ad industry—which has defended commercial free speech in advertising across all business sectors—but also the broadcast industry, which relies on pharma’s big TV buys—almost $3.5 billion last year—as a key revenue stream.

Leerink analysts said in a note that the proposal not only won’t work to reduce drug prices, but will also push some pharmas away from TV altogether. And that, in turn, could affect investment in new drugs, they said, because established brands would have a leg up on new drugs trying to build a market without the help of television commercials.

The proposal “will pour cold water on DTC advertising, particularly on TV," the analysts noted. "DTC, particularly television DTC, is just not that important to the industry, and the idea that a marketer, or business unit executive, might decide to lower the list price (to thereby make the apparent price disclosed to consumers more palatable), rather than suspend television DTC altogether, doesn’t seem likely."

"So the consequence of this regulation is likely to be a flight away from television DTC, which in turn can be counterproductive for healthcare innovation, and tends to ultimately favor incumbents over new entrants,” they added.

No matter the outcome of Azar's proposal, HHS and the Trump administration seem far from done with drug companies.

“Sometimes markets evolve on their own, but sometimes it takes government to make the first move to disrupt a broken system and to lay down new rules of the road. As you’ve heard today, we’re willing to do just that,” Azar said. “We will not wait for an industry with so many conflicting and perverse incentives to reform itself. When we change the rules, the market players will reorganize their businesses to fit the new world. And it will be a very different world for America’s drug prices.”