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Comments on Proposed Regulation to Require Drug Price Disclosures

The Centers for Medicare and Medicaid Services (CMS) recently proposed a rule that would require pharmaceutical companies to disclose the list prices of prescription drugs in television ads. We submitted comments pointing out flaws in the agency’s analysis of the proposal’s likely costs and benefits.

Our comments note that CMS has not persuasively shown that high drug prices are the result of an informational market failure. Rather than lacking information about list prices, consumers may lack an incentive to make treatment decisions based on that information, because they have insurance coverage for prescription drugs. We also urge CMS to more thoroughly assess the proposal’s potential to influence consumer behavior in undesirable ways. Some consumers may, for example, mistakenly interpret the list price as the price they will pay out of pocket for a drug and forgo seeking treatment due to affordability concerns. Other consumers may mistakenly associate price with quality, leading them to select more expensive, less beneficial treatment options.

To better understand how consumers and manufacturers will respond to the proposed disclosure requirements, CMS should (1) review existing academic literature on mandatory disclosures in health care markets, and (2) conduct its own research on the proposal’s likely effects.