DTC Pharmaceutical Marketing Linked $324B in Medicare Drug Spending

Medicare drug spending reached $560 billion from 2016 through 2018, with pharmaceutical marketing accounting for nearly $324 billion in overall spending, according to a GAO study.

Of the 553 advertised drugs in the study, researchers found Medicare Parts B and D spending for 104 and 463 drugs, respectively. About half of this spending was for three categories of drugs that treat chronic medical conditions: arthritis, diabetes, and depression.

But GAO also found that nearly all direct-to-consumer (DTC) spending was on brand-name drugs. Moreover, about two-thirds of this spending concentrated on 39 drugs that entered the market from 2014 through 2017.

Notably, some of the drugs with the highest Medicare spending also had the highest DTC spending. Overall spending is expected to increase with newer, more expensive drugs and an increase in beneficiaries. 

Out of the top ten drugs with the highest Medicare Parts B or D expenditures, four drugs were among the top 10 drugs in advertising spending in 2018. These drugs included Eliquis, Humira, Keytruda, and Lyrica. 

GAO's review of the four drugs found that drug manufacturers changed their DTC pharmaceutical marketing spending during key events, such as increased spending when a drug was approved to treat additional conditions or decreased spending following generic brands' approval.

Overall, drug manufacturers spent $17.8 billion on DTC pharmaceutical marketing for 553 drugs from 2016 through 2018. And spending reached $6 billion annually. 

DTC spending may have contributed to increases in Medicare beneficiary use and spending on the four selected drugs from 2010 through 2018, the study found. 

But researchers believe that other factors also contribute to a drug’s Medicare beneficiary use and spending, making it challenging to isolate the relationship between drug and advertising, use, and spending. 

GAO’s review found that increases in unit prices were factors for Eliquis, Humira, Keytruda, and Lyrica. On the other hand, stakeholders noted other contributing factors, including doctor’s prescribing decisions and manufacturers’ drug promotions directed to doctors. 

According to GAO, drug manufacturers have stated that drug advertisements can educate consumers about undiagnosed medical conditions and can help them receive needed treatment earlier.

Ultimately, this may reduce spending on other types of medical care. And drug advertisements may encourage compliance in taking medications among patients as well. 

But some consumer and provider organizations have voiced that the increase in drug manufacturers’ consumer advertising may have contributed to the growth in prescription drug spending because of inappropriate drug use or unnecessary costs. 

In 2015, the AMA called for a ban on DTC pharmaceutical marketing due to concerns that it may inflate consumer demand for newer and more expensive brand drugs.

At the time, the vote reflected concerns among physicians about the negative impact of commercially-driven promotions and the role that marketing costs play in fueling escalating drug prices, Patrice A. Harris, MD, MA, former AMA president, said in the 2015 announcement.  

DTC pharmaceutical marketing also inflates demand for new and more expensive drugs, even if these drugs are not appropriate, Harris explained.