List Prices in Drug Ads on TV Coming as CMS Finalizes Rule

Regulatory NewsRegulatory News
| 08 May 2019 | By Zachary Brennan 

Despite numerous comments raising questions about a proposal to include list prices in pharmaceutical direct-to-consumer (DTC) advertisements, the Centers for Medicare and Medicaid Services (CMS) on Wednesday moved ahead and finalized the proposal.

The final rule, which will take effect in July, requires that television advertisements for prescription drugs or biological products with a list price of $35 or more contain a statement indicating the Wholesale Acquisition Cost (also referred to as WAC or the list price) for a typical 30-day regimen or for a typical course of treatment, whichever is most appropriate.

The disclosure, which will be determined on the first day of the quarter during which the advertisement is being aired or otherwise broadcast, will be included as follows: “The list price for a [30-day supply of ] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.”

In defending its rule, CMS explained how in 2017, over $5.5 billion was spent on prescription drug advertising, including nearly $4.2 billion on television advertising. And spending on DTC pharmaceutical commercials increased 62% between 2012 and 2017.

Meanwhile, a recent poll by the Kaiser Family Foundation found that 88% of Americans support requiring drug manufacturers to include their list prices in DTC advertisements, CMS said.

Critics of the proposal, however, have explained how including the prices in DTC ads is not likely to lower drug prices overall, how list prices are not representative of what consumers pay, how CMS has not created an enforcement mechanism to ensure companies comply with the new rule, and some even questioned whether the new requirement should fall under CMS’ purview.

In defending its right to require the list price disclosures, CMS said in the final rule: “Although we acknowledge that neither section 1102 nor section 1871 of the Social Security Act specifically references prescription drugs or biological products, their prices, or advertisements, we nevertheless believe that requiring manufacturers to include list prices in DTC television advertisements is supported by the plain text of these statutes.”

In terms of the WAC not being a meaningful measure of what a patient will pay for a drug, CMS countered with a recent JAMA study that found consumers could more accurately determine their out-of-pocket costs when list prices were disclosed.

Some critics also contended that the rule would be a violation of manufacturers’ First Amendment rights.

But CMS counters that “the speech here at issue does not implicate core First Amendment interests. Manufacturers already disclose the very same information at issue, their products’ WACs, to purchasers as well as publishers of various pricing databases and other compendia.”

CMS also took issue with industry group PhRMA’s recently implemented voluntary program to require member companies to disclose drug prices online.

“PhRMA’s issuance of a new guiding principle in October 2018 does not change the need for the rule. The
PhRMA principles are voluntary; they are not binding on PhRMA members, let alone non-members, and there is nothing to prevent PhRMA from revising its principles at any time … We believe that relatively few viewers will make use of the approach advocated by the PhRMA proposal, even assuming that its members implement the proposal,” CMS said.

PhRMA said in a statement Wednesday that it believes "there are operational challenges, particularly the 60-day implementation timeframe, and think the final rule raises First Amendment and statutory concerns.”

But as far as enforcement of the rule, CMS does not plan to force companies to comply, other than by maintaining an annual list of drugs that have violated the rule.

“We anticipate that the primary enforcement mechanism will be the threat of private actions under the Lanham Act sec. 43(a), 15 U.S.C. 1125(a), for unfair competition in the form of false or misleading advertising,” CMS added.

But Rachel Sachs, assistant professor of law at Washington University in St. Louis, explained to Focus that it’s not clear that all companies would even have competitors to file such suits under the Lanham Act, or that competitors would even file such suits because of how expensive they are.

Sachs also explained how she does believe an entity will sue CMS on Constitutional and statutory grounds before this final rule is implemented. She said CMS will likely be challenged because of the broad interpretation of its authority to regulate drug advertising.

“More generally, we should be skeptical that transparency on its own can encourage pharmaceutical companies to lower prices,” Sachs added. “It doesn’t mean it’s bad policy, but it’s important to make sure the administration is doing other reforms alongside” this one.

Final Rule


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