The ruling is in. After months of speculation, the Trump administration will require pharma companies to include the list price of a drug in direct-to-consumer TV ads — and sooner than most experts believed.
The rule, which will go into effect July 9, will apply to ads for prescription drugs covered by Medicare or Medicaid if their list price is equal to or greater than $35 for a month’s supply or the usual course of therapy. In other words, nearly all drugs that are advertised on TV.
While some pharma companies got ahead of the requirement in the first half of the year with websites disclosing a drug’s list price or ads directing patients to those resources, the industry is largely opposed to stating list prices outright in ads.
Pharma companies and industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) argue that adding the list price without context will confuse patients. Despite the opposition, the Trump administration stuck to its guns, trusting that the average patient can decipher what the list price means for them.
Groups such as PhRMA and many drugmakers say the list price can be a misleading number that could cause sticker shock or prompt patients to forgo treatment altogether, when most patients don’t pay anywhere near that cost.
The Centers for Medicaid and Medicare Services (CMS), the agency that will enforce the rule, says in response to these concerns that “we expect [patients] to become informed consumers that engage in shared decision-making with their providers, which may allow them to select the lowest-cost alternative based on their situation.”
CMS cited research that found patients were less likely to ask their doctor about a drug if it had a high price in its ad, but including language that the drug could be available at a lower price largely mitigated those decreases.
Anna Sinaiko, assistant professor of health economics and policy at Harvard University’s T.H. Chan School of Public Health, says her research on price transparency in healthcare found that patients like to know specific costs, and broad efforts to include prices haven’t panned out in practice.
“Pressure on healthcare providers to lower prices is the promise of price transparency,” she says. “As out-of-pocket costs continue to increase, patients’ knowledge of their healthcare costs, if they have to pay out-of-pocket, can help them anticipate and help plan expenses. However, we have found that in the past five years or so, efforts to make prices transparent in healthcare haven’t achieved that promise.”
Some companies preemptively began posting list prices online this year, but Sinaiko says patients largely don’t use those online tools for price information. What patients want is specificity, she says.
Johnson & Johnson went the furthest of any drugmaker and began including the list price and typical out-of-pocket cost in ads for blood thinner Xarelto in March. Yet, as the company noted at the time, the Xarelto ads were essentially a pilot.
We know that when people have high deductible health plans or expect high cost sharing, they are less likely to get careAnna Sinaiko, Harvard University’s T.H. Chan School of Public Health
“We’re starting with our most widely prescribed medicine so we can assess how the price and cost information is received by a broad range of people,” J&J said when it disclosed it would feature drug pricing information in ads. “We will take into account patient and consumer feedback in guiding rollout to additional medicines we advertise on TV.”
Sinaiko says that method is a “step in the right direction,” but patients need more information to make informed decisions about their care.
“We know that when people have high deductible health plans or expect high cost sharing, they are less likely to get care. That might be cause for concern,” Sinaiko says. “We don’t know for sure how putting list prices for a drug will actually impact patient choices. Patients could have that reaction [where they don’t seek care] or they could say that price doesn’t mean anything to me.”
However, the Xarelto ad formula, including both the full list price and typical out-of-pocket cost, may not be the route every company takes. The Department of Health and Human Services rule requires only that companies include the list price and notes pharma companies can add additional information, such as typical costs, if they choose.
Jon Bigelow, executive director of the Coalition for Healthcare Communication, says it is likely not every company will include extra information. Pharma companies will make their own decisions about what price information looks like in ads, and that means there may be several approaches from including only the list price to disclosing both the list price and typical costs, or even more.
“As a first step, there may be coordination around the PhRMA plan of referring people to a website for additional information at minimum,” he says. “But I would imagine some companies will go further than that.”
The industry has two major concerns about the HHS rule: First Amendment rights and the 60-day implementation deadline.
Some in the industry expect legal challenges. In its statement about the requirement, PhRMA said it raised “First Amendment and statutory concerns,” implying that the group is considering a court challenge.
The pharma industry has a history of winning advertising lawsuits based on First Amendment arguments. In 2016, Amarin won a First Amendment suit against the Food and Drug Administration (FDA) after it contended that the government could not prohibit it from promoting off-label uses. The drugmaker claimed it had a right to engage in constitutionally protected speech.
While the requirement to put prices in DTC ads is a different situation, the industry could claim the rule is compelled speech and, therefore, prohibited by the First Amendment, Bigelow says.
The idea that implementation begins in 60 days is an unnecessarily tight schedule to have to change their creative, get new materials out and get them approved internallyJon Bigelow, Coalition for Healthcare Communication
The industry group is also concerned about the 60-day time frame for compliance. The brief turnaround makes it difficult for pharma companies and their agency partners to change ads, get them approved by legal departments and place new versions on TV.
“The idea that implementation begins in 60 days is an unnecessarily tight schedule to have to change their creative, get new materials out and get them approved internally,” Bigelow says. “I’m not sure why they did that. Many in the industry expected there would be more time before implementation.”
In a statement about the rule, PhRMA also noted the 60-day implementation as one of the requirement’s “operational challenges.”
The prices in TV ads will also need to be accurate for the quarter in which the spot is airing, adding even more work for marketers. To enforce the rule, CMS will keep a public online list of drugs and companies that did not comply. However, the agency says that it expects the primary enforcement mechanism will be private lawsuits within the industry under the Lanham Act for unfair competition in the form of false or misleading advertising.
The HHS rule also leaves out some drug ads. Digital and print DTC advertisements, while far outnumbered by TV spots for treatments, are also important channels for pharma advertising. DTC TV ad spending reached $5.1 billion last year, making up nearly 80% of all pharma ad spend according to Nielsen. Digital, magazine and newspaper ads account for nearly $1.3 billion combined.
The rule applies only to TV ads because HHS wants to use it “as narrowly as possible to achieve our goal of promoting price transparency and reducing drug costs, with minimal burden on those providing the information,” the final rule reads.
The focus on price information in branded TV ads could also spur a shift toward unbranded campaigns or push spending away from television, Bigelow says.
“It’s very unusual that it wasn’t changed [to include print and digital ads],” he explains. “My read is that HHS was taking the simplest path. They wanted to get some regulation on the books so they could claim victory and move on.”
This rule is also the Trump administration’s first regulation from its drug price blueprint, which it released in May 2018. However, the industry is concerned the rule may have larger implications both for the pharma companies themselves and for patients who may be caught off guard by seeing the list prices.
“Quality information is important to the patient, too,” Sinaiko says. “Thinking about how to get price information in combination with quality information for patients is probably going to be the most useful. We need both cost and quality.”