Senator Ron Wyden

Statement of U.S. Senator Ron Wyden
on the Pharmaceutical Advertising and Prudent Purchasing Act

May 26, 2005

Madam President, the cost of medicine is a matter of concern to every Senator. Today, Senator Sununu and I have introduced legislation to take a fresh approach to holding down the cost of medicines in our country. Under our bipartisan legislation, the Federal Government would pay less for pharmaceuticals that are advertise when the Federal Government buys those medicines for Medicaid, the Veterans’ Administration, the Department of Defense, and the Public Health Service.

One can barely turn on the television or open a magazine these days without getting the hard sale on a hot new medicine. There is no doubt that medical science is making miracles for our citizens who need help with their health. For that, we are, of course, grateful. But the advent of advertising for prescription drugs presents pitfalls as well, not just for patients but for every American taxpayer.

Senator Sununu and I introduced our legislation today because as the marketing gets savvier, the Federal Government needs to get smarter and contain costs wherever possible for these popular and expensive drugs. The fresh approach that Senator Sununu and I unveil today will amp up the Government's purchasing power on prescription drugs that are advertised directly to consumers. The Pharmaceutical Advertising and Prudent Purchasing Act will reduce drug costs for the beneficiaries of Medicaid and other Federal programs. It will ease the burden on States struggling to stretch their health care dollars through Medicaid, and it will lower the overall costs for taxpayers footing the bill for these advertised drugs.

When a drug company figures the price of a pill, it passes along the advertising costs to consumers. Right now, Medicare and Medicaid pay that cost like any other consumer. But it is time to take the advertising costs out of the equation for taxpayer funded programs. The Federal Government, of course, gives drug companies a tax break for advertising which, of course, every other American company gets for its business expenses. There is no need for a double subsidy. There is a need for more prudent purchasing of prescription drugs by the Federal Government. If that is going to happen, the changes in the pharmaceutical market that have been caused by the explosion of advertising cannot be ignored any longer.

I do not have to tell our colleagues that drug advertising in the United States is an immense and growing industry. The Wall Street Journal reported last week that the pharmaceutical industry spent nearly $4.5 billion on advertising to consumers. The penetration of this advertising may be more than most people realize. A recent Kaiser Family Foundation poll found that 90 percent of Americans had seen or heard an advertisement for prescription drugs. Today, more and more Americans can go to their doctor and ask to have a medication they have seen advertised on TV, in a magazine, on the radio or on the Internet.

Of course, that is what is happening. There is a proven direct connection between the advertising of drugs and a big up tick in the rate of prescriptions written for them. Take a look at the 10 most advertised drugs in the United States. That is 2003, and I would guess that few Americans would say they have not heard of any of these drugs.

On each of these drugs, at least $100 million was spent in 2003 alone on direct consumer advertising. The advertising works. A study published in the April issue of the Journal of the American Medical Association demonstrates the link. Researchers sent actors to doctors' offices to complain of mild depression. Those who mentioned seeing an ad were five times more likely to get a prescription for an antidepressant as those who simply described their supposed symptoms without talking about a drug ad they had seen. It is no wonder the heavily advertised drugs make up most of the top 10 medicines prescribed under Federal health programs like Medicare, Medicaid, and others.

Take a look. These are the 10 drugs on which Medicare spends the most total money for outpatient care. Nine are advised directly to consumers. Here are the 10 drugs on which Medicaid spends the most money. Four of the ten are advised directly to consumers. The next 4 drugs, Nos. 11 through 14, are advertised as well. It is the view of Senator Sununu and me that the Federal Government is one consumer that does not need to receive advertising from the drug companies.

The Federal Government is buying medicine for a lot of people with a limited pool of funds. It is vital to get a handle now on the connection between advertising and increased sales and to insist on more prudent purchasing.

Our legislation does just that. It makes the Government a more prudent purchaser in a straightforward way. It will require Medicaid and other vital programs under Health and Human Services and the Veterans' Administration to get a discount that cuts out the advertising costs figured in each pill. In Medicaid, this would be done by adjustments in the Medicaid rebate program. That is an existing program that requires a pricing agreement between drug manufacturers and the Federal Government for any drug to be sold through the Medicaid program.

The Health and Human Services Secretary and the VA Secretary will also be able to negotiate reduced prices for other Federal programs such as the Public Health Service, programs administered by the Indian Health Service, the Department of Veterans Affairs, the Department of Defense and the Defense Health Program.

This is smart and effective spending. It ends the spending of taxpayer dollars to fund advertising that has already received a tax break. It is a commonsense step, the kind of common sense that is all too uncommon when the Federal Government buys drugs.

Our legislation will address another issue that speaks both to the taxpayers' interests and the health of patients in these programs. When advertised drugs are purchased, it is not enough to make sure the price is right, although that is important. It is vital the drug is right for the patient's particular problem. Taxpayer dollars should buy drugs that will work best for patients by a doctor's best judgment. Just because a patient recognizes a drug's name enough to request it from their provider does not mean it is the best medicine.

More and more drug companies are treating doctors as a middleman they wish to skip. They make a lot more money if patients, without medical degrees, are encouraged to start writing their own prescriptions, whether the drug is the right one or not. Medicare, Medicaid, and other Federal programs have a charge to keep for their patients and a trust to maintain with American taxpayers. They should not be exploited financially by the pharmaceutical "flavor of the month."

I close by expressing my thanks to the Senator from New Hampshire. This is a bipartisan approach that is going to hold down the cost of medicine for taxpayers in our country. It will be a benefit to beneficiaries certainly at a time when the Medicaid Commission is trying to find responsible savings. We ensure that we take the time to study how this approach would work for other programs such as Medicare. And because I see my friend in the Chamber, I will wrap up simply by saying that it is time to take out a sharp pencil and eliminate the hidden costs for taxpayers from advertised drugs.

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