The Department of Health and Human Services (HHS) has issued a proposed rule (PR) which would require any television advertisement for a drug or biological covered by Medicare or Medicaid to include a disclosure of the product’s “current list price” for a “typical” thirty day supply.

HHS is seeking comments on the substance of the PR, in addition to many specific issues, as further outlined in this post. Comments on the PR are due December 17, 2018. We encourage those potentially impacted by the PR to submit comments in accordance with the instructions contained in the PR.

The PR would apply to advertisements for prescription drugs or biological products distributed in the United States “for which payment is available, directly or indirectly” under Medicare or Medicaid. To this point, regulation of television advertising of prescription drugs has rested with the Food and Drug Administration (FDA), which applies standards to ensure that such advertising is truthful and not misleading. As a general matter, television ads for prescription drugs must include the name of the drug, a statement of one FDA-approved indication for use, and disclosure of most significant risks associated with the drug.

According to the PR, drugs with a “list price” of less than $35 for a thirty day supply would be exempt from the disclosure requirements. For purposes of the disclosure, “list price” is defined to mean Wholesale Acquisition Cost (WAC): the manufacturer’s list price to wholesalers or direct purchasers in the United States, not including discounts or rebates for the most recent month that such data is available. The television advertisement must contain the following “textual statement” at the end of the ad, presented against a contrasting background: “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.”

HHS takes the position in the PR that the agency has appropriate statutory authority to issue such a regulation in furtherance of the “efficient administration” of Medicare and Medicaid, but further debate on this issue is expected. It is also anticipated that the PR will be challenged on legal grounds based upon First Amendment jurisprudence and the government’s ability to compel speech.

In addition to the substance of the PR itself, HHS is also specifically seeking comment on the following issues:

  • How providing consumers with the list price of a medication may influence interactions with prescribers, the selection of drug products, and the perceived efficacy of the prescribed drug;
  • How benefit design influences interactions with prescribers, the selection of drug products, and the perceived efficacy of the prescribed drug;
  • Whether the final rule should include more specific requirements with respect to the textual statement of the price disclosure, such as specific text size, contrast requirements, and/or duration and specifically what those requirements should be;
  • The primary enforcement mechanism and other approaches to enforcing compliance with the disclosure requirements;
  • Whether Wholesale Acquisition Cost is the amount that best reflects the ‘‘list price’’ for the stated purposes of price transparency and comparison shopping under the PR;
  • Whether 30-day supply and typical course of treatment are appropriate metrics for a consumer to gauge the cost of the drug;
  • How to treat an advertised drug that must be used in combination with another non-advertised drug or device;
  • Whether the cost threshold of $35 to be exempt from compliance with the PR is the appropriate level and metric for such an exemption;
  • Alternative approaches to determining a cost threshold, whether or not the threshold should be updated periodically, and if so, how the threshold should be updated;
  • The content of the proposed pricing information statement, including whether other specifications should be incorporated;
  • Whether a statement expressing an expiration date of the current price reflected in the advertisement should be incorporated into the required disclosure language so that consumers are informed that drug prices are subject to frequent changes and a drug price may differ from the date the advertisement is broadcast to the date that the drug is dispensed;
  • Whether HHS should apply this regulation to other media formats and, if so, what the presentation requirements should be;
  • Whether compliance with the PR should be a condition of payment, directly or indirectly, from federal health programs;
  • Whether the following approaches could support price transparency and informed decision making, either in addition to or in lieu of the measures proposed in the PR: (1) an enhanced CMS drug pricing dashboard, (2) a new payment code for drug pricing counseling, and (3) intelligent plan selection or use of intelligent assignment;
  • Other approaches to price transparency and informed decision making not contemplated by the PR;
  • Whether manufacturers or others submitting additional information, such as list price, typical out-of-pocket cost, therapeutic alternatives, pharmacoeconomic research, and other data, could be helpful for consumers and what information would be most useful; and
  • The ease of which CMS dashboard data could be used by a non-government entity creating and maintaining such a price transparency resource for consumers and others.

The Trump Administration published the PR in the hope that disclosure of drug prices would help create new incentives for drug companies to start lowering drug prices, as well as better inform consumers about what drugs actually cost. Needless to say, the pharmaceutical industry will be required to bear the cost of redesigning its television ad campaigns in form and substance to comply with any final regulation on this matter. Further, FDA will need to determine how the presentation of such pricing information will comply with the “truthful and not misleading” standard. Airing drug prices could spur campaigns of comparative drug pricing and may inform a new perspective at FDA regarding comparative drug advertising.

An additional concern with the PR is whether the disclosure of drug pricing in television ads for more expensive pharmaceuticals will cause “drug price sticker shock” that could potentially impact the public health as consumers may seek alternative treatment or therapies. For this reason, additional consideration will need to be given to the role of the regulators in evaluating drug pricing content in television ads and how such ads will ultimately be perceived by consumers.

In response to publication of the PR, the Pharmaceutical Research and Manufacturers of America (PhRMA) announced that it was proposing an alternative approach on disclosure of drug pricing in television ads. Under the PhRMA proposal, its members would voluntarily provide a link in television ads directing consumers to websites where drug pricing information would be provided. Using this approach, drug pricing information would not need to be included in direct-to-consumer television advertisements as proposed by the PR.