Mintz IRA Update — Disrupting the Pharmaceutical Supply Chain: The Era of the DTC Model

This article is part of the Mintz IRA Update – Fifth Edition. Explore the full series of IRA-related insights here.

While the pharmaceutical industry has reacted negatively to President Trump’s May 12 “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” Executive Order (Executive Order), manufacturers appear to be leveraging one of Trump’s directives in the Executive Order, accelerating the industry’s shift toward a new model of drug delivery: direct-to-consumer (DTC) programs.

As a quick recap, the Executive Order requires the Secretary of the Department of Health and Human Services (HHS Secretary) to create direct-to-consumer purchasing programs that allow pharmaceutical manufacturers to sell their products to American patients at most-favored-nation pricing, i.e., the lowest price the manufacturer offers to any “comparably developed” foreign nation purchasing a particular drug. Prior to President Trump’s Executive Order, manufacturers had already identified the DTC drug delivery model as a potential mechanism for making their most expensive medications accessible to patients. For years, manufacturers, insurers, and pharmacy benefit managers (PBMs) have attributed high drug costs to one another. Now, manufacturers are exploring ways to bypass traditional intermediaries — i.e., insurers and PBMs — by using telehealth platforms and other DTC providers that facilitate direct delivery of medication to patients. More than 60% of the top 10 highest-grossing pharmaceutical manufacturers have implemented or are preparing to implement DTC programs.

• Eli Lilly & Novo Nordisk: Eli Lilly and Novo Nordisk have partnered with telehealth platforms Ro, Hims & Hers, and Life MD to provide their respective obesity and diabetes treatments at a discounted price directly to consumers without insurance coverage for the drugs. The telehealth platforms directly integrate with the manufacturers’ self-pay pharmacies and allow patients to secure direct delivery of the drugs at the discounted cash price with a prescription from a provider affiliated with the telehealth platforms. Each of the telehealth platforms also offers the GLP-1 drug bundled with additional services, such as ongoing clinical support, nutrition guidance, virtual consultations, and weight management programs.
  
  Eli Lilly also launched its own DTC website, LillyDirect. Through its partnerships with other DTC providers, including telemedicine platforms and digital pharmacies, patients can access Lilly’s diabetes, migraine, and obesity medications. LillyDirect also ensures that its patient assistance and discount card programs are automatically applied to patients who qualify.
   
• Pfizer & Bristol Myers Squibb: In response to the Executive Order, Pfizer and Bristol Myers Squibb have launched a DTC online program, Eliquis 360 Support, that allows uninsured or underinsured patients to buy their blood thinner Eliquis online at a discount — $346 per month, a 43% reduction from its current list price of $606 per month. Even with this discount, the DTC price is still over nine times the average monthly out-of-pocket cost for commercially insured patients and remains well above Medicare’s negotiated maximum fair price (MFP) of $231, set to take effect next year. Notably, the Eliquis 360 Support program targets a small group of current and potential users of the drug, as more than 90% of the patients who are currently prescribed the medication access it through Medicare or commercial insurance.
  
  Similar to LillyDirect, Pfizer also has its own DTC virtual platform, PfizerForAll. Through PfizerForAll, patients can directly access vaccines and medications, order diagnostic tests and treatments, and make doctor appointments using their existing insurance coverage and pharmacy benefits. If patients are prescribed Pfizer medications, the platform connects eligible consumers with Pfizer’s patient assistance programs that help cover drug costs.
   
• Roche: Roche told investors it has begun discussions with the HHS Secretary under the Executive Order to explore a DTC model, but cannot share details in light of its ongoing conversations with the government. However, Roche’s CEO noted to investors that the DTC model could be a great option for its obesity products.

Scrutiny of Telehealth Platforms in DTC Drug Delivery Model

Integrating telehealth platforms into the DTC drug delivery model facilitates direct communication between the manufacturer and the patient — effectively eliminating the role of the PBM — and increases access to care, particularly for the uninsured and underinsured. By partnering with telehealth providers, manufacturers can supply their medications directly to patients while offering added services, such as tailored patient education, refill reminders, and disease management support. Despite these benefits, lawmakers have raised concerns that such partnerships will drive patients toward use of expensive and unnecessary medications, increasing spending for federal health care programs. Democratic Senators Dick Durbin (IL), Elizabeth Warren (MA), and Peter Welch (VT) and Independent Senator Bernie Sanders (VT) led a nine-month investigation into various arrangements between manufacturers and DTC telehealth companies. The manufacturers and their telehealth partners have emphasized that clinician decisions about which drugs to prescribe are not influenced by these arrangements, i.e., the manufacturers are not paying incentives or bonuses per prescription or contracting for a predetermined volume of prescriptions. However, following their investigation, the identifying specific concerns about how these partnerships may indirectly lead toward patient / provider steering, including the following:

• Partnering with clinicians or practices that may already have a preference to prescribe certain drugs
• Equipping manufacturers with additional tools to aim their marketing efforts at prescribing physicians
• Patients preselect which medication they seek prior to starting a consultation with a physician

While the senators’ report did not identify any overt fraud and abuse risks, it suggested its findings signal DTC providers and manufacturers may be at risk of implicating the federal Anti-Kickback Statute (AKS). The report referenced a 2022 HHS Office of Inspector General (OIG) Special Fraud Alert highlighting the risks of arrangements with telehealth platforms, and noted that OIG has previously identified “limited interactions with the purported patient, limited opportunity to review the patient’s medical records, and/or a directive to prescribe a preselected item, regardless of clinical appropriateness” as fraudulent aspects of an arrangement between a provider and a telehealth platform. While the lawmakers did not announce any particular legislative agenda targeting the DTC drug delivery model, it is evident that partnerships between manufacturers and telehealth platforms will be subject to heightened scrutiny for fraud and abuse risks as manufacturers strive to effectuate President Trump’s Executive Order.

Scrutiny of Advertising in DTC Drug Delivery Model

Another area of heightened concern in the DTC drug delivery model, this one with bipartisan support, is consumer advertising. In early June, Independent Senators Bernie Sanders (VT) and Angus King (ME) introduced the End Prescription Drug Ads Now Act, which would ban manufacturers from advertising their prescription drugs and biologics through television, radio, print, digital platforms, and social media. The End Prescription Drug Ads Now Act follows previous bipartisan efforts to restrict pharmaceutical advertising, including a bill sponsored by Senators Durbin (D-IL) and Chuck Grassley (R-IA) that would require price disclosures on advertisements for prescription drugs, and another bill sponsored by Senators Durbin and Roger Marshall (R-KS) that would have imposed civil penalties on health care providers and social media influencers for making false or misleading statements regarding prescription drugs and biologics. Congress has yet to act on the End Prescription Drug Ads Now Act and it will undoubtedly face a number of legal challenges, as US courts have held that advertising is protected under the First Amendment’s right to free speech. Nonetheless, it is likely to receive support from the Trump administration, given that HHS Secretary Kennedy has previously announced his plan to issue an executive order to stop drug ads from appearing on television. In light of HHS Secretary Kennedy’s and bipartisan Congressional support of efforts to rein in pharmaceutical advertising, we expect to see some reform materialize in DTC advertising of drugs and biologics.

Proceeding (Carefully) Forward

While President Trump’s Executive Order has pushed manufacturers to accelerate their adoption of the DTC drug delivery model, the industry remains cautious for the reasons noted above. Further, widespread adoption of the DTC drug delivery model will pose logistical challenges and disrupt traditional drug distribution channels through wholesalers and distributors — manufacturers may be required to invest in distribution infrastructure in order to send medications directly to patients. However, we are already seeing industry stakeholders step up to fill the gap. For example, BlinkRx has unveiled a new initiative to help manufacturers set up direct distribution channels. BlinkRx’s Operation Access Now program advertises the ability to launch DTC sales of manufacturer drug products within 21 days. The Trump administration has also met with Walmart, Amazon, and other retailers to explore ways to facilitate distribution and delivery of drugs directly from manufacturers to patients. In addition to the new operational demands, manufacturers will be forced to confront the tension created by the DTC model in existing relationships with insurers and PBMs. Despite the operational and relational challenges, the DTC drug delivery model appears poised to drive a change in drug distribution and patient access.

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