CMS Proposes TV Drug Ads Must Reveal Pricing Information

By Shefali Luthra and Sarah Jane Tribble, Kaiser Health News

The Trump administration proposed Monday that drugmakers reveal the list prices of their medicines in television ads, effectively setting the stage for months or possibly years of battle with the powerful industry.

The proposal, released late in the day, would require pharmaceutical companies to include in its television advertising the price of any drug that cost more than $35 a month. The price should be listed at the end of the advertisement in “a legible manner,” the rule states. It goes on to explain that the price should be presented against a contrasting background in a way that is easy to read.

Health and Human Services Secretary Alex Azar, nodding to an industry proposal announced earlier in the day, said voluntary moves are not enough.

“We will not wait for an industry with so many conflicting and perverse incentives to reform itself,” Azar told the audience gathered at the National Academy of Sciences in Washington, D.C.

If approved, the proposed rule has no government enforcement mechanism that would force the companies to comply. Rather, it depends on shaming, noting that federal regulators would post a list of companies violating the rule. It would depend on the private sector to police itself with litigation.

“It is noteworthy that the government is unwilling to take enforcement action,” said Rachel Sachs, an associate professor of law at Washington University at St. Louis and expert in drug-pricing regulation. The rule might never be finalized, she added.

“It will take many months if not years for this regulation to be implemented and free from the cloud of litigation that will follow it. And the administration knows that,” Sachs said.

Earlier Monday, the pharmaceutical industry trade group went on the offensive in anticipation of Azar’s speech by announcing its own plans.

“Putting list prices in isolation in the advertisements themselves would be misleading or confusing,” argued Stephen Ubl, CEO of the Pharmaceutical Researchers and Manufacturers of America, or PhRMA, the major trade group for branded drugs.

Instead, Ubl, whose trade group represents the largest pharmaceutical manufacturers on the globe, promised that pharma companies would direct consumers to websites that include a drug’s list price and estimates of what people can expect to pay, which can vary widely depending on coverage.

Drug manufacturers would voluntarily opt in to this disclosure starting next spring, he said. Ubl remained strongly critical of the White House proposal.

The Trump administration’s proposal comes weeks before midterm elections in which health care is a top voter concern. Polling from the Kaiser Family Foundation suggests most voters support forcing price transparency in drug advertisements. (Kaiser Health News is an editorially independent program of the foundation.)

The White House’s plan, which was teased in President Donald Trump’s blueprint this summer, has won praise from insurance groups and the American Medical Association.

Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) also proposed the plan in the Senate last month, but it failed to garner enough support.

Experts pointed out a host of complications, suggesting that neither PhRMA’s approach nor the White House’s would fully explain to consumers what they’ll actually pay for drugs.

On Monday, Grassley applauded Azar’s announcement, saying it was a “common-sense way to lower prices.”

But Dale Cooke, a consultant who works with drug companies trying to meet Food and Drug Administration requirements for advertising, warned there is no reason to believe posting prices would help drive down prices.

“No one has ever explained to me why this would work,” Cooke said. “What’s the mechanism by which this results in lower drug prices?”

Even more, it could be confusing for patients, Cooke said. The proposed rule seemed to acknowledge this danger, he said, noting, “On the other hand, consumers, intimidated and confused by high list prices, may be deterred from contacting their physicians about drugs or medical conditions.”

A drug’s list price — the metric HHS wants to emphasize — often bears little relationship to what a patient pays at the drugstore. Insurance plans and pharmacy benefit managers often negotiate cheaper prices than the list price. Some patients qualify for other discounts. And often patients pay only what their copay or deductible requires at any given time.

Other consumers could be stuck paying the full cost, depending on how their insurance plan is designed, or if they don’t have coverage.

“The system is very opaque, very complicated and, importantly, there isn’t a huge relationship between list prices for drugs and what patients will expect to pay out-of-pocket,” said Adrienne Faerber, a lecturer at the Dartmouth Institute for Health Policy and Clinical Practice who researches drug marketing.

But the industry’s strategy, she said, also appeared lacking.

Under PhRMA’s plan, drugmakers would not standardize how they display their information. Where consumers go could vary on Pfizer’s website versus Merck’s to learn about the list price and the range of out-of-pocket costs. That, Faerber argued, would make it difficult for people to unearth relevant information.

PhRMA also announced it is partnering with patient advocacy groups to create a “patient affordability platform,” which could help patients search for costs and insurance coverage options.

Ubl cast their proposal as a way to address more effectively the government and public concern about drug price transparency.

Pharmaceutical manufacturers rely heavily on national advertising and together represent the third-highest spender in national television advertising, according to Michael Leszega, a manager of market intelligence at consulting firm Magna.

At certain times of day, pharmaceutical ads make up more than 40 percent of TV advertisements. And those commercials stand out because they are generally longer, with a long list of side effects and warnings the pharmaceutical industry must tag on at the end.

Those disclaimers highlight another challenge for the administration: legal action.

The rule notes its legal justification was based on the responsibility of the Centers for Medicare & Medicaid Services to ensure the health coverage programs that it administers — Medicare and Medicaid — must be operated in a manner that “minimizes reasonable expenditures.”

Sachs noted that the argument may be weak because most drugs are marketed to a wider audience than Medicare and Medicaid beneficiaries.

A body of Supreme Court decisions dictate how disclaimers and disclosures can be required, said constitutional law expert Robert Corn-Revere. He filed a “friend of the court” brief in a 2011 U.S. Supreme Court case related to commercial speech and the pharmaceutical industry.

Generally, the administration’s requirement must meet the standards of being purely factual, noncontroversial and not burdensome, Corn-Revere said.

On the question of whether requiring drug prices be listed in advertising violates the First Amendment’s free-speech guarantee, Corn-Revere said it “all comes down to the specifics.”

Ubl, when asked earlier about legal action, didn’t rule out the possibility. “We believe there are substantial statutory and constitutional principles that arise” from requiring list-price disclosure, Ubl said, adding: “We do have concerns about that approach.”

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

This article originally appeared on Kaiser Health News.