Direct-to-Consumer Advertising May Be Driving Up Medicare Drug Spending

According to a May 2021 report from the Government Accountability Office (GAO) — an independent, nonpartisan agency that does research for Congress — direct-to-consumer (DTC) prescription-drug advertising may be a major factor contributing to rising spending on medications by the Medicare program and its beneficiaries.[1]

The GAO report was prompted by a request from the U.S. Senate Committee on the Judiciary for an examination of recent trends in DTC drug-advertising spending and in Medicare spending on prescription drugs. Notably, the U.S. and New Zealand are the only countries where DTC prescription-drug advertising is allowed.

According to the GAO, from 2016 to 2018, drug manufacturers spent approximately $18 billion — about $6 billion per year — promoting more than 550 drugs directly to consumers in the U.S.[2] Not surprisingly, 99% of these drugs were brand-name products, and drug manufacturers expended most of their DTC advertising dollars — $13.4 billion — on television ads.[3]

The GAO found that from 2016 to 2018, pharmaceutical companies spent $12 billion — two-thirds of their total spending on DTC ads during this three-year period — on just 39 drugs.[4] Drug companies generally target spending on DTC drug advertising during the first several years after a new drug is approved by the Food and Drug Administration to promote consumer awareness and establish market share.

The GAO’s analysis also showed that the Medicare program and its beneficiaries spent nearly $324 billion on prescription medications that had been advertised directly to consumers from 2016 to 2018.[5] This amount comprised more than half of total spending on drugs under Medicare Parts B and D during this time.

The GAO further found that three of the top 10 drugs with the highest Medicare Part D spending in 2018 were among the top 10 drugs with the highest DTC-advertising spending in that year: HUMIRA (adalimumab, a rheumatoid arthritis biologic drug), LYRICA (pregabalin, a pain and seizure drug) and ELIQUIS (apixaban, an oral blood thinner).[6] Similarly, one of the top 10 drugs with the highest Medicare Part B spending in 2018, the cancer drug KEYTRUDA (pembrolizumab), was among the top 10 drugs with the highest DTC-advertising spending. The GAO concluded that DTC advertising may have contributed to increased Medicare beneficiary use and spending for these drugs.[7]

In response to the GAO report, Senators Dick Durbin and Chuck Grassley — the chair and ranking member, respectively, of the Senate Committee on the Judiciary — introduced a bill requiring prescription-drug ads to include pricing information.[8] Although pricing transparency in DTC drug ads would be a useful step, a far more effective way to rein in drug prices for Medicare beneficiaries would be passage of legislation giving the Medicare program authority to negotiate prices with drug manufacturers.
 

References

[1] United States Government Accountability Office. Report to Committee on the Judiciary, U.S. Senate: Prescription Drugs; Medicare Spending on Drugs with Direct-to-Consumer Advertising. May 2021. https://www.gao.gov/assets/gao-21-380.pdf. Accessed July 11, 2021.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Chuck Grassley C. News release: Durbin, Grassley, King introduce bill to require price transparency in prescription drug advertisements. June 24, 2021. https://www.grassley.senate.gov/news/news-releases/durbin-grassley-king-introduce-bill-to-require-price-transparency-in-prescription-drug-advertisements. Accessed July 11, 2021.