Congress Ends ‘Gag Agreements’ To Lower Drug Prices

President Donald Trump recently signed into law two bills lawmakers hope will lower drug prices.

The “Know the Lowest Price Act” and the “Patient Right to Know Drug Prices Act” lift pharmaceutical “gag agreements” between pharmacies and insurance companies that prevent pharmacists from disclosing cheaper drug alternatives.

The “Patient Right to Know Drug Prices Act” ends gag agreements for employer insurance plans and individual plans, while “Know the Lowest Price Act” does the same for Medicare Advantage and Medicare Part D plans.

Both bills received nearly unanimous support from both the House and Senate. Despite the bipartisan support, some groups and lawmakers are concerned that the legislation will not do much to lower drug prices.

The bills’ advocates, including Trump himself, have expressed hope that better-informed consumers will make drug markets more competitive. According to this logic, makers of more expensive drugs that have been protected by gag agreements would now have to lower prices to compete with cheaper alternatives, putting a general downward pressure on drug prices.

Lauren Blair, spokeswoman for the Campaign for Sustainable Rx Pricing, said transparency alone cannot lower high drug prices.

“This is certainly progress but there’s a lot more work to be done,” she said, “both in the transparency bucket specifically, and broadly in the larger effort to tackle drug prices.”

Both bills were a part of the Trump administration’s plan, released in May, to lower drug prices. Industry advocates have expressed conflicting expectations as to whether the bills will actually lower drug prices.

Mark Merritt, president and chief executive of the Pharmaceutical Care Management Association, said gag agreements are rare and that he expects little effect on drug prices.

“[The practice of gag agreements] is not condoned by the industry,” he said. “We don’t defend it. It has occurred on rare occasions, but it’s an outlier practice that we oppose.”

The Pharmaceutical Care Management Association, which represents the pharmacy benefit managers that negotiate price agreements between drug manufacturers and pharmacies, sued North Dakota last year over a law banning gag agreements and introducing other regulations for pharmacy benefit managers.

Thomas Menighan, chief executive of the American Pharmacists Association, said gag agreements are “not an outlier,” but relatively common.

Under many contracts, Menighan told the New York Times, “the pharmacist cannot volunteer the fact that a medicine is less expensive if you pay the cash price and we don’t run it through your health plan.”

Senator Mike Lee, R-Utah, who voted against the “Patient Right to Know Drug Prices Act,” attempted to amend the bill so it would apply only to federal-level insurance plans.

“[W]e must recognize that it is not the role of the federal government to regulate entities under the jurisdiction of the states,” Lee said.

More than 25 states have already passed legislation lifting gag clauses in state and local insurance agreements.

Arkansas Governor Asa Hutchinson said he fears that lower drug prices may run independent pharmacists out of business and thereby reduce drug access in rural areas.

“A marketplace solution, I assure you, is much better than a legislative solution,” Hutchinson said.

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