New Laws Lift 'Gag Clauses' on Pharmacists

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When you pick up your prescription at your local drugstore, you may not be aware that the pharmacist might be prohibited from telling you whether you could save money by paying out of pocket instead of using your insurance.

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Known as "gag clauses," the rules have been included in pharmacy contracts with insurers in more than a dozen states. But President Trump voiced his support for repealing the clauses, and on Wednesday he signed into law legislation that bans the clauses for private insurance, effective immediately, and in Medicare Advantage and Part D prescription-drug plans, effective January 1, 2020. At least 29 states also have passed laws in recent years to ban the gag clauses, according to the National Conference of State Legislatures.

Many consumers haven't heard about the clauses, or that even under the gag rules, a pharmacist could tell you about the lower price—if you know to ask.

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Ditching the gag rules is a win for consumers. "There shouldn't be anything that prevents the pharmacist from talking honestly and candidly to consumers and giving them all the information they need to know," says Julie Carter, senior federal policy associate with the Medicare Rights Center.

In some cases, if you have a hefty co-pay, it might cost less to pay for a drug yourself, especially if you can use a manufacturer discount card or coupon. But if you use a Medicare Advantage or Part D plan to pay for your drug, you'll still be restricted on what discounts you can access, regardless of whether a gag clause exists, says Rich Sagall, president of NeedyMeds.org, which compiles drug discount resources.

Federal law prohibits drug companies from giving their coupons or discounts to people who get their health benefits through the federal government, because it would be considered a violation of the government's anti-kickback statute.

Medicare beneficiaries who want to cut costs should ask the pharmacist whether there's a generic or lower-cost drug available, and then figure out whether paying out of pocket and using a discount card would be less expensive than the insurance co-pay. Read "Retirees, Find Help to Cover Expensive Drug Costs" for more.

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Mary Kane is a financial writer and editor who has specialized in covering fringe financial services, such as payday loans and prepaid debit cards. She has written or edited for Reuters, the Washington Post, BillMoyers.com, MSNBC, Scripps Media Center, and more. She also was an Alicia Patterson Fellow, focusing on consumer finance and financial literacy, and a national correspondent for Newhouse Newspapers in Washington, DC. She covered the subprime mortgage crisis for the pathbreaking online site The Washington Independent, and later served as its editor. She is a two-time winner of the Excellence in Financial Journalism Awards sponsored by the New York State Society of Certified Public Accountants. She also is an adjunct professor at Johns Hopkins University, where she teaches a course on journalism and publishing in the digital age. She came to Kiplinger in March 2017.