Americans face a medication affordability crisis. According to our recent consumer survey, 40% of respondents have skipped or delayed filling prescriptions due to cost, and KFF found a quarter of patients have problems paying for their medications.
Pharmaceutical manufacturers are increasingly adopting direct-to-consumer (DTC) models to help address these cost challenges. These arrangements allow people to buy drugs directly from manufacturers at a discount. Several pharma companies, such as Eli Lilly and Pfizer, conduct these transactions through their own platforms, and some have also partnered with online pharmacies and telehealth companies to offer medications. Fourteen manufacturers have agreed to participate in government-run TrumpRX, which connects patients with DTC drugs through manufacturers’ sites.
DTC services have generated public interest. According to the same survey, nearly three-quarters of respondents said they would be very or somewhat likely to purchase medicine directly from a manufacturer, with lower costs being the primary motivation.
Companies advertise DTC medications at 50-80% off list prices, which sounds like a great deal, but the reality is more nuanced.
The Nuance of DTC pricing
When insured patients fill prescriptions, they typically pay a defined co-pay or coinsurance set by their plan while the insurer covers the remainder at a negotiated net price. DTC transactions do not go through insurance, meaning patients pay entirely out of pocket. Discounts are calculated based on list prices, not the lower net prices paid by insurers or government programs.
The list prices are established by the traditional drug distribution system. Intermediaries, including pharmacy benefit managers (PBMs), insurers and government payers, negotiate discounts and rebates on behalf of health plans and hospitals. Manufacturers use price optimization strategies to set list prices with those concessions in mind, reflecting the expectation that most sales will occur at a lower negotiated net price.
Against that backdrop, even 80% off list prices will still likely cost patients significantly more than they would pay under insurance. And it’s unclear if these discounts constitute a genuine price reduction on the net price because insurance and government discounts are confidential.
Who Benefits from DTC?
DTC will increase drug accessibility, but its impact will not be universal. Primary targets of DTC would typically be uninsured patients and those who face coverage exclusions, coverage gaps or prohibitively high cost-sharing that makes insurance effectively unusable.
This model is most relevant in therapeutic areas where coverage is limited or inconsistent — such as maintenance drugs, lifestyle or quality-of-life treatments like dermatological medications, and often excluded indications, such as GLP-1s for weight loss.
GLP-1s are a poster child for DTC. Patients using private or government insurance typically pay a copay of $25 or $50. However, many plans only cover the drug when it’s used for diabetes treatment. As a result, weight loss patients must pay out of pocket for their prescription, which has a list price of around $1,000. According to KFF, a quarter of GLP-1 users have insurance but pay the entire cost themselves.
Manufacturers are offering GLP-1s DTC to reduce the price, but in many cases, the fee after discounts is still around $500 a month. Even the new, “cheaper” WEGOVY pill costs between $149 and $250 without insurance.
That amount is cost-prohibitive for many people. As a result, DTC disproportionately benefits patients with sufficient disposable income who can absorb recurring cash payments. Obesity rates are highest among lower-income populations, so even DTC discounts don’t meaningfully change affordability for many who need the drug.
More Robust Solutions Are Needed
Unfortunately, the U.S. drug pricing ecosystem is too complex to be solved by a single new distribution channel. For the majority of patients who rely on insurance, meaningful savings come from how prices are set, negotiated and applied within existing coverage frameworks. Moving the needle on costs will require adjustments to rebate structures, increased pricing transparency and mechanisms that ensure negotiated savings reach patients at the pharmacy counter.
Jesse Mendelsohn
Jesse Mendelsohn is a Senior Vice President at Model N, the leading revenue optimization and compliance provider for life sciences and high-tech manufacturers. With nearly 20 years in the industry, Jesse is an expert in pharmaceutical pricing, revenue, payer management, and government regulation, including Medicaid and state pricing laws.
