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Pharma Advertising: Driving Up Health Care Costs at the Expense of Taxpayers Since 1981

TV viewers may be unaware that prescription drug commercials set to upbeat music and featuring smiling faces may be a driving force behind prescription drug price increases. Prescription drug corporations use billions of ad dollars to push patients to newer, often more expensive drugs. And corporations can write off all of it as a tax deduction and as the cost of doing business. The Improving Access to Affordable Prescription Drugs Act, a recently-introduced bill endorsed by Public Citizen, eliminates these deductions for pharmaceuticals. Recently, the American Medical Association (AMA) pushed new guidelines aimed at including the price of drugs in direct-to-consumer (DTC) marketing of prescription drugs. These initiatives could help curb the abusive direct-to-consumer practices of drug corporations.

Merck, now one of the largest pharmaceutical corporations in the world, printed the first DTC ad of a prescription drug in a magazine in 1981 and the practice has been mired in controversy ever since. The drug ads that we know today were born in 1997 when the Food and Drug Administration (FDA) loosened regulations on the mandatory content of TV commercials for prescription drugs. The FDA altered the DTC regulation, which originally mandated the inclusion of a brief summary that had to contain all risks, to simply require a major statement containing only major risks and an adequate provision. The major statement would then direct viewers to the location of the full brief summary and all pertinent health information. By loosening the FDA regulation, the United States opened the floodgates to tax-deductible advertisements for expensive drugs that don’t include full risk information for consumers.

The industry claims that there are some positives from consumer exposure to DTC marketing of prescription drugs. The ads make some patients more likely to research conditions and treatments or seek care, and they may lessen the stigma surrounding certain diseases as well. However, with these “positives” come significant negatives for the patient-doctor relationship, including biasing treatment toward the marketing claims instead of scientific and health data, as well as increasing spending for prescription drugs.

DTC marketing of prescription drugs can misinform patients and lead to inappropriate prescribing practices. In one study, 94 percent of doctors had a patient request an advertised drug and 74 percent of those requested drugs were medically unnecessary for the patient. The same study states that 40 percent of physicians experienced up to five requests for drugs a week and 43 percent of doctors felt pressured to prescribe those drugs. Lastly, other studies have shown that DTC marketing directs patients toward more expensive brand name drugs, when cheaper and equally effective generics are available.

Drug corporations blame the increasing costs of research and development (R&D) for recent price spikes, yet health policy experts and analysts have determined that there is no correlation between the two. Instead, corporations determine prices based on maximizing corporate profitability. Corporations factor in monopolies; the presence, or lack thereof, of generics; and public willingness to pay high prices for the prescription drugs to treat their loved ones. Increasing expenditures for marketing and advertising may actually be a bigger force behind the rising price tag for many drugs. In a recent Public Citizen report, we noted that profit margins dwarfed total R&D expenditures at each of the biggest pharmaceutical companies.

The industry spent $5.6 billion on DTC marketing in 2016, a nine percent rise from the previous year. The AMA resolution on DTC ads identifies AbbVie’s drug Humira as a drug that is inexplicably getting more expensive for patients.  AbbVie’s parent company (Abbott Laboratories) acquired Humira, when it was already in late-stage development, for $7 billion in 2001. Since 2011, the drug has yielded over $70 billion in revenue, enough to cover all of AbbVie’s global R&D costs.  Revenues collected from just the pricing of all AbbVie products in the United States account for 166 percent of their global R&D. Abbvie has not changed the drug’s composition, yet its price has risen 13 percent on average per year over the past decade.  A reasonable person would wonder why the price is going up if current drug prices fund R&D at a surplus and the drug has not changed. Clearly this is not a marker of “innovation.” AbbVie spent $439 million advertising Humira in 2016, a 20 percent increase from 2015 and likely higher than Humira’s annual price increase. The FDA recently approved a biosimilar, or competitive biological product, to Humira, so AbbVie may be using DTC marketing as a tool to foster brand loyalty as AbbVie loses its legal monopoly on the drug. The solution to cut down on such abusive practices could include increased transparency in DTC marketing of prescription drugs.

The AMA has made several attempts to reduce or eliminate DTC advertisements, previously taking the position that these advertisements should be banned as they are in every other country in the world except the United States and New Zealand. At the AMA’s annual conference in July,  six states brought Resolution 236: Retail Price of Drugs Displayed in Direct-to-Consumer Pharmaceutical Advertising to compel the association to advocate for legislation that requires manufacturers to include drug prices in DTC advertising. The AMA’s House of Delegates passed the resolution at the conference. Requiring drug prices in DTC commercials would give patients a key tool they need to better collaborate with their doctor and to make decisions that are in their best interest both medically and financially.

While measures like increased price transparency in DTC advertisements would be a step in the right direction, to truly rein in the industry’s persistent price gouging and curb misleading advertisements, more ambitious policies are required. One possible solution can be found in Senator Al Franken’s recently introduced bill, Improving Access to Affordable Prescription Drugs Act (S. 771 and its companion bill in the House, H.R. 1776). Among 17 other provisions to lower drug prices, this bill would disallow drug corporations from writing off the cost of DTC marketing as a tax deduction. This would incentivize the industry to spend less on DTC ads, which could help reserve more funds for R&D expenditures and reduce misinformation in the public. Combined with initiatives to include prices in the ads, DTC advertisements could change dramatically to air less frequently overall and, when present, to provide better information for patients.