Politics Drives Direct-to-Consumer Price Disclosure Rule

In publishing its proposed rule on disclosing drug prices just three weeks before the November mid-term Congressional elections, it’s not a big stretch to regard the move by the Trump Administration as designed primarily for short-term political purposes-and not to better inform the American public. It appears just in time for President Trump and Republicans to claim they’re taking action to lower exorbitant drug prices-even though analysts question whether the required price information will be of any use to patients, and legal challenges could delay enforcement of the policy for months, if not years.

The proposal issued by the Centers for Medicare and Medicaid Services (CMS) now faces a 60-day comment period that will generate multiple objections to the requirement that direct-to-consumer (DTC) drug ads disclose the wholesale acquisition cost (WAC) for products that cost more than $35 a month for treatment. Insurers, doctors, and consumer groups applaud the price transparency proposal, while the Pharmaceutical Research and Manufacturers of America (PhRMA) and the advertising industry strongly oppose it. Broadcasters stand to lose a good chunk of the $3.5 billion spent by pharma companies on DTC ads and will support PhRMA’s expected lawsuit challenging the validity of the rule and claiming that it violates First Amendment protection of free speech.

A broader issue is whether disclosing WAC prices on drugs in DTC ads would provide any useful information to consumers, particularly those in Medicare or Medicaid, the stated beneficiaries of the rule. Even though FDA regulates prescription drug advertising, the proposal came from CMS, which can claim that price transparency supports its interest in reducing outlays for drugs paid by public health programs. But Medicare and Medicaid patients largely have fixed co-pays that don’t vary with price, and they benefit from negotiated rates instead of paying list prices, as do many individuals in commercial plans. List price disclosure might be of greater benefit to individuals with high-deductible plans or percentage co-pays, and for consumers without any health insurance who pay cash. High list prices can pose a particular burden for patients using specialty drugs and therapies for rare disease, but those products run few TV ads, and marketers point to patient support programs that can address individual coverage hardships.

Pharma companies claim that disclosure of WAC rates will only confuse consumers and may inhibit patients from seeking care. And they regard the requirement to disclose proprietary price information as a violation of first amendment protections, particularly if the required information is not relevant to most consumers. The administration counters that court decisions have upheld the right of government agencies to require disclosures that support a public interest. In fact, CMS is considering whether to expand disclosure to other marketing media, such as print ads and electronic communications.

PhRMA lobbying succeeded in blocking Congressional approval of a similar ad disclosure provision that was added to a big budget bill in September and is ramping up to achieve a similar outcome in this round. As a stopgap, PhRMA is pushing an alternative plan for DTC ads to direct viewers to company websites with relevant price information. Despite the opposition, the administration is expected to finalize the rule sometime next year, and FDA will be key to implementation, including publication of guidance clarifying the requirements and penalties for violations.