New CMS Rule: Drug Advertisements Must Include List Prices

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    On Monday, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule requiring drug manufacturers to list a product’s monthly wholesale price, or the cost for a typical course of treatment, if it is greater than $35 for 30 days. CMS asserts that the purpose of the proposed rule is to reduce drug prices overall.

    Before it was issued, the proposal triggered pushback from drug companies.  The industry argues that the disclosure of prices without additional context is misleading, since consumers pay a fraction of the list price due to insurers and pharmacy benefit managers negotiating for lower costs.  However, the Trump Administration countered that the list price is relevant to patients before they meet insurance deductibles, or when a specific medication is not covered by a plan.

    A brief summary and its impact on ACG members:

    Drug costs borne by ACG members and patients:  ACG Governors and members continue to convey the problems associated with the high costs of prescription drugs.  CMS notes that Medicare beneficiaries spent more than $238 billion on prescription drugs in 2016 — more than half of the U.S. total. Over the past decade, drug spending for a Medicare Part D beneficiary increased nearly 40% — more than double of the consumer price index (CPI) for inflation.  CMS also notes that drug rebates are expected to exceed 28% of total Medicare Part D drug costs within the next 10 years. Thus, CMS asserts that price transparency will reduce potential abusive increases, ultimately empowering consumers to be smarter purchasers of drugs.

    Legal Authority: This regulation (if finalized) will likely find its way into the court system.  Policy experts were quick to debate whether CMS has the legal authority to compel drugs manufacturers to disclose drug prices during advertisements.  CMS asserts that the Social Security Act (SSA) provides broad rule-making authority for the administration of the Medicare and Medicaid programs to implement regulations necessary.

    Purported Benefits of Price Transparency: CMS asserts that price disclosure in advertisements could impact utilization and spending.  According to CMS, most consumers lack access to price information.  Thus, list prices would be a helpful “anchor price,” even if it is not the amount most insured individuals will end up paying for the drug.

    CMS also cites other statutory provisions which currently require drug pricing disclosures to the government (e.g., Medicaid rebate pricing) to demonstrate that Congress has previously endorsed the use of price disclosure as a means to advance the goal of minimizing unreasonable expenditures.

    CMS did note in the rule that “Congress has not explicitly provided HHS with authority to compel the disclosure of list prices to the public,” but counters that “Congress has explicitly directed HHS to operate Medicare and Medicaid programs efficiently” and asserts that facilitating efficient markets through price transparency falls within this mandate. Finally, CMS concludes that its proposal “is necessary to the efficient administration of the Medicare,” and that direct-to-consumer advertisements without price disclosure undermine the efficient administration of the programs.

    The Proposal: CMS proposes to require prescription drugs and biologics reimbursed by Medicare or Medicaid (directly or indirectly), to include the product’s current list price, defined as the Wholesale Acquisition Cost (WAC, or “list price”) in DTC broadcast advertisements.

    The advertisements would be required to disclose the list price for a typical 30-day regimen (chronic) or a typical course of treatment (acute). The list price must also be accurate as of the date of publication or broadcast. CMS proposes that the advertisement contain the following statement: “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.”

    CMS proposes to exempt any advertisement from the disclosure requirement if a typical course of treatment or 30-day supply has a WAC of less than $35.

    CMS further proposes that manufacturers would be allowed to include a competing product’s list price, so long as they do so in a truthful and non-misleading way.

    CMS proposes to maintain a public list of manufacturers that violate this rule.  CMS predicts, however, that private actions would serve as the primary mechanism of enforcement.

    Other Information in Proposed Rule:  CMS is not proposing to extend these requirements to radio, magazines, newspapers, internet websites and other forms of social media.

    The proposed rule notes that in 2017, manufacturers spent more than $5.5 billion on prescription drug advertising, including nearly $4.2 billion on TV.  CMS also cites a number of studies which demonstrate the effect of direct-to-consumer ads on utilization.

     

    -Neil Stollman, MD, FACG
    Chair, ACG Board of Governors

    -Patrick Young, MD, FACG
    Vice Chair, ACG Board of Governors

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