May 26, 2005

Federal Government Will Pay Less for Advertised Prescription Drugs under New Wyden Legislation

Legislation would mandate discount for Medicaid, other Federal programson drugspromoted to consumers with tax-deductible advertising

Washington, DC - The Federal government would pay less for prescription drugs advertised directly to consumers under new legislation introduced by U.S. Senator Ron Wyden (D-Ore.) today. The bipartisan Pharmaceutical Advertising and Prudent Purchasing Act, introduced with and U.S. Senator John Sununu (R-N.H.), would require discounts for programs such as Medicaid, to eliminate advertising costs passed on by pharmaceutical companies as part of a drug's price; drug companies already receive tax deductions from the Federal government for their advertising costs, as do most American businesses. Drugs advertised directly to consumers are among those drugs on which Federal programs spend the most total money for outpatient care; studies have indicated that advertising, not medical need, may have contributed to national upswings in prescriptions for those drugs. For this reason, the Wyden legislation also requires a report to Congress on how drugs advertised directly to consumers impact Federal programs in terms of purchase volume, cost, and their suitability for patients' medical needs. "The government should make smarter use of its purchasing power for drugs advertised directly to Oregon consumers. The Federal government provides a tax break for that advertising, and taxpayers shouldn't have to further subsidize the drug companies' marketing efforts through Medicare and Medicaid," said Wyden. "It's also important to make sure that when the Federal government buys drugs, they're buying drugs patients need and not just the pharmaceutical flavor of the month. Insisting on prudent spending of tax dollars and getting the best medical outcomes are not mutually exclusive - in fact, they may go hand in hand." Specifically, the Pharmaceutical Advertising and Prudent Purchaser Act of 2005 would seek to reduce the costs of directly-marketed prescription drugs in Medicaid, Medicare and other Federal programs in the following ways: • Requiring the Secretary of the Department of Health and Human Services (HHS) to adjust certain formulas for those drugs in the Medicaid rebate program, which requires drug companies to have a pricing agreement with the Federal government for medicines dispensed under Medicaid. Changes would not occur for any drug for which the manufacturer certifies that no direct-to-consumer advertising has taken place in the previous 12 months. • Requiring the HHS Secretary and the Secretary of Veterans Affairs to negotiate a reduced price for other programs for drugs advertised directly to consumers, unless the drug manufacturer certifies that the drug has not been advertised directly to consumers within the past 12 months. This would affect the Public Health Service and related programs administered by the Indian Health Service; the Department of the Veterans Affairs; and the Department of Defense and the Defense Health Program. In addition, the legislation requires an HHS report on ways that Congress and Federal agencies could reduce taxpayers' costs in Medicare (Parts A, B and D) for drugs advertised directly to consumers, and strategies to make sure that drugs are prescribed in Federal programs based on patients' health needs, not on advertising. The HHS Secretary, in consultation with the VA, would also be required to tell Congress: • What percentage of drug companies' advertising costs are passed along to Federal programs when they purchase medicines that have been advertised directly to consumers; • The 25 most frequently prescribed drugs that are directly advertised to consumers and that are also purchased or reimbursed by Federal agencies; • The 25 most expensive prescription drugs that are directly advertised to consumers and that are also purchased or reimbursed by Federal programs; • The aggregate amount that drug companies spend to advertise to consumers for the 25 most expensive advertised drugs; • Ways that Federal agencies and programs can share information about drugs that are advertised to consumers, including the costs and utilization of these drugs; and • Additional recommendations to help reduce Federal payments for advertised drugs. "This sensible savings in this legislation offer relief not only to beneficiaries of programs like Medicaid, but also to states that are stretching their health care dollars and to the citizens footing the bill," said Wyden. "It's time to take out a sharp pencil and eliminate the hidden costs for Oregon taxpayers from these advertised drugs." For more information on this legislation, contact Andrew Blotky in Senator Wyden's office.