This morning, the Centers for Medicare and Medicaid Services (CMS) released a final rule that will require pharmaceutical manufacturers to include the list price of a drug in direct-to-consumer (DTC) television advertisements. This idea was initially included in the administration’s drug pricing blueprint, American Patients First, and proposed in a rule released in October 2018. Provisions of this final rule become effective on July 9, 2019.
All prescription drugs and biological products available directly or indirectly under Medicare or Medicaid will have to include the wholesale acquisition cost (WAC) of the product in all direct-to-consumer (DTC) television advertisements. The WAC, which is often referred to as the list price, must be for a typical 30-day regimen or typical course of treatment.
The price will be from the first day of the quarter during which the commercial is airing and will be included at the end of the advertisement. CMS includes the following language for the advertisements:
“The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug of biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.”
Drugs that cost less than $35 per month for a 30-day supply or typical course of treatment are exempt. Advertised products that violate these requirements will be included in a public list maintained by the Secretary of the Department of Health and Human Services (HHS). This is the only HHS-specific enforcement mechanism; instead, the agency believes that the threat of private legal action related to false or misleading advertisement will be the primary enforcement mechanism.
In response to the initial proposal, some commenters suggested that CMS expand this to all advertising. CMS declined to do so saying that, “since DTC television advertising makes up the majority of DTC spending, this is a good place to start to have the largest impact with the smallest burden.” The agency goes on to say that they reserve the right to expand this policy to other media formats in future rulemaking.
Multiple public comments received in response to the initial proposed rule raised questions about CMS’ statutory authority to implement these proposals, noting that the sections of statute cited by CMS do not say anything about prescription drugs, their prices, or advertisements for them. CMS disagreed with these comments saying that they have the authority to implement regulations “as necessary for the efficient administration of Medicare and Medicaid.” CMS believes that this rule will improve the efficient administration of the Medicare and Medicaid programs by making sure beneficiaries are provided with information about drug costs. Other commenters suggested that Congress gave the Food and Drug Administration (FDA), not CMS, the authority to regulate DTC advertisements. CMS responded by saying that whether the FDA has that authority is not related to whether CMS has the authority to implement this disclosure requirement and that since CMS reimburses for prescription drugs, it is appropriate for CMS to impose such a requirement.
Many commenters also expressed concern over the use of WAC in these advertisements, saying it is not a meaningful measure of what a patient will pay and so can be misleading and confusing. CMS disagreed, saying that WAC is a relevant data point can provide insight into a patient’s out-of-pocket expense in both Medicare and commercial markets. CMS also cited the required language for these advertisements, which includes that statement, “If you have health insurance that covers drugs, your cost may be different.”
To note, the same day that HHS released their initial proposal to include list prices in DTC advertisements, the Pharmaceutical Research and Manufacturers of America (PhRMA) announced its own initiative related to DTC advertisements. Under the initiative, advertisements would direct consumers to a company website with information intended to provide context for drug prices, such as list prices, estimated out-of-pocket costs, or other available financial information. The overarching idea for this was laid out in an update to the organizations’ “Guiding Principles on Direct-to-Consumer Advertisements about Prescription Medicines.” All 33 members of PhRMA agreed to the voluntary initiative which was set to take effect on April 15, 2019. Thus far, only Johnson & Johnson announced they would include list prices in commercials, starting with the anti-coagulant Xarelto; this announcement was made prior to the release of today’s final rule.