The Centers for Medicare & Medicaid Services (CMS) has finalized its proposed rule requiring pharmaceutical manufacturers to disclose the Wholesale Acquisition Cost (WAC) in Direct-to-Consumer (DTC) television advertisements for certain prescription drugs and biological products (the Final Rule). The Final Rule will appear in the Federal Register on May 10, 2019 and will become effective on July 9, 2019. It is largely unchanged from the proposed rule, which we previously blogged on here.
The Final Rule requires that any advertisement on TV (including broadcast, cable, streaming, or satellite) for a prescription drug or biological product for which reimbursement is available under Medicare or Medicaid must include 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 price]. If you have health insurance that covers drugs, your cost may be different.”
The “list price” to be inserted is the WAC, which is defined as the manufacturer’s published list price for the most recent month available, not including discounts or rebates. The list price should reflect the WAC for a typical 30-day regimen or typical course of treatment, as appropriate, and as determined on the first day of the quarter during which the advertisement is being aired on television or otherwise broadcast. For a drug with multiple indications, the list price to be used is the one for the course of treatment associated with the indication advertised. The statement must appear at the end of the advertisement in legible text with a style, font, and duration that allows it to be read easily. The preamble to both the Proposed Rule and the Final Rule (though not the regulation itself) states that manufacturers would also be permitted to include truthful and non-misleading information about a competing product’s current WAC, so long as the provision of such information is consistent with current law.
The Final Rule applies to prescription drugs for which payment is available, directly or indirectly, under Medicare or Medicaid, with the exception of products with a WAC of less than $35 per month for a 30-day supply or typical course of treatment. The only penalty for a failure to provide the statement would be inclusion of the manufacturer on a publicly available “shame” list on CMS’s web site. However, CMS states in the preamble to the Final Rule that it believes the primary enforcement mechanism will be the threat of private actions under the Lanham Act for false or misleading advertising, asserting optimistically that the threat of meritless lawsuits is “acceptably low.”
According to CMS, the Final Rule seeks to address the rising prices of prescription medicines and the impact that such costs have on the Medicaid and Medicare programs. It also seeks to address over-utilization of prescription drugs caused by patients requesting “costly drugs and biological products seen on television.” Finally, CMS asserts, in the Final Rule, that DTC advertising lacking information about a drug’s price is potentially misleading. CMS states that if patients better understand the costs associated with prescription drugs or biological products, they will make “good health care choices,” which will in turn promote efficiency in the Medicaid and Medicare programs. CMS rejected arguments that the WAC itself is misleading because it does not reflect actual out-of-pocket costs paid by consumers. CMS cited a 2019 study published in the Journal of the American Medical Association as support for the proposition that consumers are better able to estimate their out-of-pocket costs knowing the WAC than without knowing it.
We will continue to report on drug pricing regulations and legislation at the federal and state level.