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Medicare Spent Bulk of Drug Cash on Advertised Products

June 17, 2021, 10:20 PM

Medicare and its beneficiaries spent $560 billion on prescription drugs between 2016 and 2018, and nearly 60% of that money went to products the pharmaceutical industry advertised directly to consumers, a government watchdog report found.

The Government Accountability Office’s report, released Thursday, indicates that direct advertising practices may have led to increases in Medicare patient use and spending for at least some drugs, but that other factors—such as doctors’ prescribing decisions—likely played a role.

Drugmakers advertise drugs through television and other media to encourage patients to ask their doctors for specific medications. Manufacturers spent about $6 billion each year—for a total of $17.8 billion—on direct-to-consumer advertising for 553 drugs from 2016 to 2018, the report found.

Almost half of all ad dollars centered on prescription drugs to treat chronic conditions like arthritis, diabetes, and depression. Nearly all spending was for more expensive, brand-named drugs, with two-thirds of ad dollars spent on 39 drugs. About 20 of those had recently secured FDA approval, according to the report.

The amount drugmakers spent to advertise ranged from less than $10,000 per drug to more than $100 million, the GAO said. AbbVie Inc.‘s rheumatoid arthritis drug Humira had the highest amount of ad spending at $1.4 billion. Pfizer Inc. spent $913 million to advertise its neuropathic pain drug Lyrica, and Eli Lilly & Co. spent $655 million to advertise its Type 2 diabetes drug Trulicity.

Manufacturers would spend more on advertising for their product’s launch and for advances in the drug’s development, the report said.

The GAO report found that the industry’s “spending spree” on advertising drives Medicare costs, Senate Majority Whip Dick Durbin (D-Ill.) and Sen. Chuck Grassley (R-Iowa) said in a statement.

“GAO documented Pharma’s tried and true scheme: America’s seniors are being targeted with ads for expensive medications without disclosing the price of the drug, then Medicare spending is inflated to the tune of tens of billions of dollars each year,” they said.

The lawmakers said they plan to introduce legislation to “bring transparency to Pharma’s unfair drug advertising practices by requiring the disclosure of the product’s cost, which will lower drug spending and empower patients.”

To contact the reporter on this story: Lesley Torres in California at ltorres@bloombergindustry.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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