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DTC And The Art Of Selling An Establishment Pricing Plan To A Populist President


There were plenty of applause lines during the Rose Garden drug pricing event hosted by President Donald Trump and HHS Secretary Alex Azar.

The most important, however, was one delivered by Azar on a surprising topic: direct to consumer advertising. “If we want to have a real market for drugs, why not have them disclose their prices in the ads, too?”

The applause was important not because it was loud or protracted: an earlier line from Trump about making the “middlemen” less “rich” took the honors for longest ovation.

Nor was it important because of the underlying policy. The call to regulate DTC was surprising and unexpected, for sure, but even if it is implemented as outlined – a very big “if” – it is a decidedly small step in the context of proposals that might eliminate rebates, reinvent the PBM model, apply competitive bidding to Part B, and revamp the Part D formulary rules. (Also see "How Drug Promotion Might Change Under Trump's Rx Pricing Plan" - Pink Sheet, 14 May, 2018.)

No, the applause was important because of who applauded first: President Trump. The DTC proposal is important not because of its potential impact on drug prices, but because of its value in promoting an establishment Republican vision for price competition from within the populist and unpredictable Trump White House.

Trump is notoriously averse to in-depth policy briefings, and most of his prepared remarks where read in a cadence that suggested little interest in the specifics of the plan. However, Trump knows TV – thanks to his background in reality television and well-known TV watching habits in the White House. It is safe to assume he has seen more than his share of DTC prescription drug ads.

And there is no denying that Azar’s idea appealed to the President. He had been listening to Azar’s remarks with a distinctly stony expression. However, he perked up when Azar turned to advertising and broke into applause with the call for pricing disclosure.

That may explain why Azar of all people would make the idea central to the highest profile speech he has ever given. As plenty of commenters have pointed out since, the idea that FDA could compel manufacturers to add pricing information to ads is almost certainly a non-starter. The much bigger question is whether FDA can continue to enforce any of its existing advertising and promotion policies in the context of evolving First Amendment protections for commercial speech.

But no one understands that reality better than Azar. Before he first joined HHS in the George W. Bush Administration, Azar was one of the lawyers who successfully brought First Amendment/commercial free speech cases against FDA. He knows exactly how big a stretch it is for FDA to assert that it can compel disclosure of prices.

That may help explain the anti-climactic conclusion of his remarks on that point: HHS is “going to look into having the FDA require this” rather than simply issue new rules.

The Azar plan has been painted as industry friendly – and it is clearly far better for biopharma than a more populist approach that involves direct federal price setting authorities. But there are significant and substantial reforms on the table. (Also see "Trump Drug Pricing Plan Includes Part D Surprises, Challenges PBM Business Model" - Pink Sheet, 11 May, 2018.)

However, before beginning his ambitious plans to make market forces work better in drug pricing, Azar needs to get a populist President to sign off on an establishment approach. If calling for a new regulation to DTC helps accomplish that goal, it seems like a very smart proposal indeed.

From the editors of the RPM Report


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