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Analysis

Proposal Would Require Drugmakers to Put Prices in Their TV Ads

By Steven Porter  
   October 15, 2018

The proposal calls for manufacturers to include the wholesale acquisition cost for drugs in television advertisements.

Direct-to-consumer television ads for prescription drugs would be required to include list price information under a proposed rule released Monday afternoon by the Trump administration.

The proposal, which Health and Human Services Secretary Alex Azar announced during a speech at the National Academy of Medicine's Annual President's Forum, calls for manufacturers to post the wholesale acquisition cost (WAC) for drugs covered by Medicare or Medicaid.

"For too long, drug pricing has been like no other market," Azar said. "Prices are completely opaque in the industry that makes it a point of claiming their list prices are often meaningless. But that second part is not really true."

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Despite the complexities of drug pricing rebates and discounts, the list price is a useful starting point that empowers consumers to make informed decisions about their own healthcare, Azar said.

But the purported utility of this information is one of the main sticking points for those who contend the proposal won't work.

"Simply disclosing a drug's list price in advertisements would be misleading because list prices don't account for rebates and negotiated discounts provided to pharmacy benefits managers and other players in the complex supply chain," Lindsay Bealor Greenleaf, director at ADVI Health, told HealthLeaders. "Adding to the confusion is that patients' out-of-pocket costs will vary depending on the benefit design of an individual's health plan."

Consumers already have enhanced access to drug pricing information, thanks to two recently signed laws banning pharmacy gag clauses, Bealor Greenleaf added.

Industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) has pushed back against the proposed requirement, arguing that publicizing list prices would cause confusion and could inappropriately lead consumers to refrain from getting the medication they need.

PhRMA sought to preempt Azar's speech with an announcement of its own Monday morning, outlining new voluntary principles to increase price transparency in TV ads without government intervention. Azar was quick with a retort, saying the Trump administration would not be relying on voluntary action.

"We will not wait for an industry with so many conflicting and perverse incentives to reform itself," Azar added during his speech Monday afternoon.

PhRMA sought also to portray this debate as one with potential First Amendment implications. But legal scholars suggested that argument is a stretch.

"Industry could challenge the proposal as unconstitutional compelled commercial speech, but it is doubtful that such a challenge would be successful," Ameet Sarpatwari, JD, PhD, an instructor in medicine at Harvard Medical School, told Politico. "A strong argument exists that list prices are factual, uncontroversial information, in which case HHS would need only to show that the disclosure requirement is rationally related to legitimate government interest."

The proposal would apply if a drug's list price is more than $35 for a month's supply, according to a fact sheet released by the Centers for Medicare & Medicaid Services. List prices for the top 10 most-commonly advertised drugs range from $535 to $11,000 per month (or the usual course of therapy), according to the CMS fact sheet.

The proposal drew praise from a number of industry stakeholders, including the Campaign for Sustainable Rx Pricing (CSRxP), of which the American Hospital Association is a founding member.

"Consumers have the right to know how much medicines cost, and providing drug pricing in advertisements will do just that. We must build off this and accelerate efforts to ensure affordable drug prices for American patients," CSRxP said in a statement calling the proposal "real progress."

America's Health Insurance Plans (AHIP) President and CEO Matt Eyles similarly commended the Trump administration's move.

"There are three ways to meaningfully reduce drug prices: increase competition, increase visibility into manufacturer pricing practices, and focus on true value for patients and consumers," Eyles said. "Giving consumers pricing information in drug advertising will empower them to have more informed conversations with their doctor about the best approach to improve their health and manage their medical conditions."

The full policy proposal is available on the Federal Register. Comments will be accepted until December 17.

Steven Porter is editor at HealthLeaders.


KEY TAKEAWAYS

The pharmaceutical industry approved voluntary standards this month, but Azar said mandatory standards are needed.

The proposal would require list price information in direct-to-consumer TV ads for drugs that cost more than $35 per month.

Critics contend the loose relationship between list prices and out-of-pocket costs could render the disclosure requirement virtually useless.


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