Final Rule Requires Drug Price Disclosures in TV Ads

The final rule will require drug makers to post the list price if that price is equal to or greater than $35 for a month's supply.

The pharmaceutical industry will soon be required to post the costs of pricey prescription drugs in direct-to-consumer TV ads for drugs covered by Medicare and Medicaid under a final rule unveiled today by the federal government.

"We're telling drug companies today you've got to level with people what your drugs cost. Put it in the TV ads," Health and Human Services Secretary Alex Azar said at a media availability Wednesday morning.

"Patients have a right to know, and if you're ashamed of your drug prices, change your drug prices," he said. "It's that simple."

The final rule, which takes effect 60 days after its publication in the Federal Register, will require drug makers to post the list price – the Wholesale Acquisition Cost – if that price is equal to or greater than $35 for a month's supply or the usual course of therapy.

"Why did we pick $35 as the threshold? We picked that because it approximates insurance plans average copayment for a preferred-brand drug," Azar said. "The public is already accustomed to paying roughly this amount for drugs out of pocket. In the absence of new information, we might presume that patients will pay this amount for a drug."

The rule will only apply to TV ads, Azar said, because that's where the pharmaceutical industry concentrates its advertising spend.

"Of the $5 billion that the pharmaceutical industry spends per year in advertising, $4 billion is on television ads. It is currently the highest-impact area for their advertising activity," Azar said.

"We decided at this moment to focus there, where they believe they are getting the highest impact and spending the most money," he said. "The door is open to other platforms and other forms of advertising as we move forward and as we evaluate the impact of behavioral change caused by this requirement."

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According to HHS, the 10 most commonly advertised drugs have list prices ranging from $488 to $16,938 per month or usual course of therapy.  

Nearly half (47%) of Americans have high-deductible health insurance plans, which means they often pay the list price of a drug until they have spent through their deductible.

PhRMA 'Concerned'

Pharmaceutical Research and Manufacturers of America President and CEO Stephen J. Ubl said the drug industry is "concerned that the administration's rule requiring list prices in direct-to-consumer (DTC) television advertising could be confusing for patients and may discourage them from seeking needed medical care."

"We support providing patients with more transparency about medicine costs, which is why our member companies voluntarily began directing patients to links to comprehensive cost information in their DTC television advertising," Ubl said. "After speaking with patients across the country, we learned that patients prefer this approach."

Azar, a former top executive at Eli Lilly & Co., said the pharmacuetical industry's call to provide a link in the TV ad to pricing information on a website "would not be compliant with the requirements of this rule."

"The PhRMA proposal that they simply do that is not acceptable," he said. "They put $4 billion a year in TV advertising, because that is where people are getting their information. The transparent pricing information should be in a place and location where they are also pitching the patient to talk to their doctor and incur expenses."

Drug makers will police themselves

Azar said HHS would rely on the drug companies to police themselves.

"Enforcement of this rule will be done the way enforcement is traditionally done in the television marketing space with drug ads, which is actually by competitors," he said. "If a drug company fails to include the required information in their ad, then a competitor may bring a Lanham Act action against them for a deceptive trade practice."

"There are very large legal practices built on pharma companies suing each other for violations of the Deceptive Trade Practices provisions of the Lanham Act, so this will be a quite effective mechanism of enforcement," he said.

Ubl also raised concerns about the "operational challenges" of final rule, "particularly the 60-day implementation timeframe," and he added that the final rule "raises First Amendment and statutory concerns."

Azar rejected suggestions that the pricing requirement would infringe on free speech rights.

"We don’t believe there is any problem with requiring people in their ads, where they are telling patients to go to the doctor's office, to ask a doctor about a drug, for patients to be informed of what the price of that very product is," he said.

"We think it is a fundamental right to know, whether the drug they're being pitched is a $50 drug or a $5,000 drug before they are asked to spend hundreds of dollars on a doctor's appointment to ask about that drug."

Azar said the pricing disclosure will "prompt a more knowledgeable discussion between the doctor and the patient." He noted the car manufacturers have been required to post sticker prices on cars for more than 50 years.

The price disclosure rule was first brought forward in May 2018 as part of President Donald Trump's American Patients First  blueprint to reduce drug cost and lower patients' out-of-pocket expenses.

Azar said HHS received 147 comments about the proposed rule during the comment period, but that no big changes were made for the final rule.