The CMS on Wednesday finalized a rule that forces drug manufacturers to provide the list price for their products in direct-to-consumer ads, a policy aimed at increasing transparency and vehemently opposed by industry.
The new policy will apply to drugs or biologics with list prices greater than $35 for a month's supply or the normal course of therapy, which HHS Secretary Alex Azar said is what consumers would be accustomed to pay because it's close to an insurance plan's average copayment for these drugs.
Azar shot back at pharmaceutical industry claims that the rule would confuse consumers because the list price isn't what they pay due to discounts and rebates.
"Claiming list prices don't matter is almost the same as claiming there is no problem with high drug costs at all," Azar said during a call with reporters on the rule.
The rule doesn't exactly define how the list price should be included in the ad.
"We left it to the people designing ads that this needs to be in a font size and color that is legible," said John O'Brien, senior adviser on drug pricing for HHS, at an event sponsored by the Atlantic in Washington on Wednesday.
Drugmakers will need to do more than place a link to pricing information in the ad. The leading pharma lobbying group, Pharmaceutical Research and Manufacturers of America, had called for its members to add a link to more information as a way to circumvent the need for federal regulation.
"They put $4 billion a year into TV advertising," Azar said of drug companies. "To point [consumers] to the internet is the equivalent to saying they should put their ads on the internet and not on TV."
He added that the rule, first proposed in October and going into effect in 60 days, will also allow drug companies to say that insurance may change the price.
PhRMA President Steve Ubl bashed the rule during the Atlantic event, touting instead the association's voluntary program to add a link in ads.
"Rather than a government mandate to cram this information into an already cluttered ad, we believe patients should have this information along with comprehensive information," Ubl said.
The CMS is relying on drug companies to effectively regulate each other, a break from how direct-to-consumer ads are currently regulated.
The Food and Drug Administration already regulates direct-to-consumer ads and cracks down on companies that fail to list the side effects among other violations. However, HHS decided not to send the rule through FDA but rather through the CMS due to legal reasons.
"We decided that our authority with the Social Security Act with Medicare and Medicaid provided the strongest platform and enforcement with the Lanham Act rather than having FDA inject itself into list pricing considerations," Azar said.
The Lanham Act is a law that governs trademarks and copyrights. It also allows competitors to sue one another for making false statements in an ad.
"There are very large legal practices built on pharma companies suing each other," Azar said.
The secretary brushed off a question about whether the rule violates First Amendment rights for drug companies, noting that car dealers are required to post the sticker price for their cars.
But pharma companies have successfully used the First Amendment to challenge and overturn advertising regulations before. The FDA has lost several federal lawsuits from pharma companies challenging the agency's authority to prohibit the promotion of off-label use of a drug product by the manufacturer because of First Amendment concerns.
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