• by Robert Ehrlich , Columnist, December 5, 2017

Is the ability to do direct to consumer(DTC) prescription drug advertising in trouble? In Congress and at the state level, numerous proposals are in play to make DTC advertising harder to do. These range from ending the tax deductibility of advertising to requiring full disclosure on marketing expenses by drug companies. Of course, these threats have been going on for years and to date nothing has happened to make DTC harder to do.

This time may be different. Congress is under intense pressure to make drugs more affordable. Consumers are being hit with higher deductibles and increasing co-pays. While drug spending is only about 10% of our annual healthcare cost, consumers see their drug bills more frequently than hospital or physician expenditures. Politicians constantly remind them that their drug bills are too high. This is on both sides of the aisle, and President Trump reminds us how drug companies have made enormous profits on high drug prices and that must end. 

Drug advertising is the visible and convenient scapegoat for critics who blame DTC for increasing demand for branded drugs. While there is no evidence DTC raises drug prices, and one can argue the opposite is true because of competition, the widely held perception is drug advertising is raising prices. The recent trend towards DTC for cancer drugs and other highly targeted diseases, which can cost over $100,000 a year, has increased pressure on regulators and legislators to rein in DTC. 

The drug industry argues that DTC let’s patients know what new treatment options are available and puts pressure on reluctant insurers to cover newer drugs. It also speeds physician adoption as they get patient requests for drugs advertised. Since no one involved in healthcare is totally objective in evaluating new drugs, DTC is just one added way to hear about new drugs. Insurers, government, and physicians all have their reasons to go slow on recommending or paying for newer drugs. Insurers and government want to contain costs, and physicians often like to see a drug perform over a few years before prescribing it.

What is likely to happen for DTC advertising? First amendment grounds will prevail on commercial speech and an outright ban is not going to happen. What is more likely are Congressional actions to cajole drug makers to keep price in line. This could be through allowing importation of drugs from Canada and Europe, or through giving Medicare negotiating power over drug prices. Would drug companies give up DTC to prevent reimportation or Medicare price negotiation? Would they trade off DTC to prevent limiting tax deductions for marketing? They might agree to limit DTC under these trade off scenarios. Drug companies will evaluate the cost/benefit of lessening DTC expenditures to keep more pricing power.

Those voluntary actions could be to hold off on DTC for new drugs for a period of a few years. Drug makers might also agree to limit DTC for drugs above a certain price point. Drug makers want the right to do DTC but they are clearly sensitive to the criticisms that DTC raises demand in patients who may not need or benefit from the drug.

DTC for many media companies is a key revenue generator. We can expect the media lobby to join with drug makers and their agencies to pressure legislators not to restrict DTC advertising. Is this lobby strong enough to counter those who are demanding DTC restrictions? We will find out if Democrats regain control of Congress in 2018 and the White House in 2020. They will almost certainly try to impose changes that will impact DTC advertising.