Could DTC Programs Help Simplify the Drug-Pricing System?

Pharmaceutical Executive: What impact will DTC programs have on prescription drug prices?
Chris O’Dell: I’m optimistic that they will have an impact in the long term. In the near term, however, what was announced has limited impact. At the end of the day, complexity is the enemy here.

The fact that no one knows what a drug is going to cost them before they get it is clearly a problem in the US. Shining a lot on that complexity and showing that list prices on drugs are way too high is something that everyone can get behind.

There’s a saying that consumers don’t care what a drug’s cost is, they care what it costs them. In that sense, the program will have a limited effect because no one pays these high list prices.

Through Medicare or Medicaid, people probably pay very little for these drugs, especially compared to the list price. People paying through commercial insurance plans are paying a copay based on what the list price could be.

The idea that we are exposing that these markups are too high is a good thing. Consumers will start to scrutinize a dark corner of health care that leads to better and cheaper healthcare.

PE: Could DTC programs help simplify the drug-pricing system?
O’Dell: I’m guessing that the pharmaceutical manufacturers are also trying to simplify the system. None of this stuff is particarly novel.

There was a Finance Committee hearing in 2019 where Senator Chuck Grassley brought in all of the pharmaceutical executives. One of my favorite snippets from the hearing was the CEO of Merck saying that system prefers the higher price.

It leaves more room along the way for people to get rebates and discounts. For the average consumer to understand that, it’s just too far gone.

What they will understand is a concept that’s happened in other industries is the disruption of the supply chain. It brings that manufacturer of the product closer to the person that consumes it.

PE: What makes TrumpRx different from other government-run health programs?
O’Dell: TrumpRx is different in that its following on coattails in things that are already proven in other parts of the industry. During the pandemic, we saw DTC growth start to take off.

People became accustomed to being able to purchase drugs directly. The pharmaceutical industry started to get in on this with programs like Lilly Direct and offered drugs cheaper to the consumer at a direct price.

Trump has recognized that the list price is often incredibly high. Both sides of the aisle would critique that and want to reduce the list price.

No one ever pays list price, so there’s opportunity to offer it significantly lower through DTC. TrumpRx is only clear on what it will do for patients on Medicaid.

However, it’s shedding a light on a trend that’s already happening and exposing a complex part of the healthcare ecosystem.

PE: How will DTC programs impact PBMs?
O’Dell: In the near term, nothing. You can see how the stock prices reacted. People are looking to see if the middlemen are being taken out of the equation.

At this point, no, that’s not happening. In the long term, however, the need to take a big cut along the way may not be necessary and PBMs may not play as significant a role.

There’s a lot of steps in the drug value-chain, and I don’t think all of them will be eliminated. Many of them may be shrunken down.

The idea of negotiating in bulk for a discount is why something is cheaper in bulk than at cost. We understand the need to spread out complex processes and have third-party logistics to distribute these drugs.

These drug companies are not going to go door-to-door to sell this stuff.

PE: What impact will DTC programs have on generic drug prices?
O’Dell: Not much today, but generics are not completely immune to the gross-to-net bubble. The market has driven the price of generics down, and we won’t see generics impact for a while.

They’re not going to target generics. They’re going after the big, brand-name drugs that make for a splashy headline.