WSGR ALERT

HHS Proposes New Rule Requiring Drug TV Advertisements
to Include the Drug's Retail Price

November 13, 2018

Introduction

Prescription drug pricing in the U.S. has received significant and widespread attention lately from the media, consumers, and the government. For example, the Washington Post ran an article that examines the sometimes opaque relationship between drug pricing and drug value. Also, a recent survey conducted by the INOVA Personalized Health Accelerator indicated that a larger percentage of healthcare costs are continuing to shift from employers to consumers. And the Trump administration has repeatedly promised to "bring down" drug prices.1

Against this backdrop, the Department of Health and Human Services (HHS) recently published in the Federal Register a notice proposing a new Regulation to Require Drug Pricing Transparency. Interestingly, the proposed rule was issued "pursuant to sections 1102 and 1871 of the Social Security Act."2 In the notice, HHS asserts that "Price transparency is a necessary element of an efficient market that allows consumers to make informed decisions when presented with relevant information, but for consumers of prescription drugs…both the list price and actual price to the consumer remain hard to find."3

The HHS's rationale, in isolation, relies upon a standard premise of economics, that prices convey information, including opportunity cost and market signals, to consumers. But drugs are very different from, for example, cars. First, the cost to develop new drugs is staggering—in some instances well over $1 billion. Furthermore, the patent life for a drug is limited, which means a manufacturer must both recoup its $1 billion in costs and make a profit on the drug in fairly short order. Additionally, the retail or "sticker price" of a drug is not what many patients in the U.S. actually pay, for example, because of health insurance coverage, discounts, and rebates negotiated by Pharmacy Benefit Managers and state and federal governments, exclusive formulary deals with drug makers, and efficacy pricing. Also, at least some drugs, unlike cars, are necessary for survival, and this adds to the calculus used by manufacturers when setting drug prices—which in turn, makes it difficult to provide appropriate context in a TV advertisement on what patients pay for their medicines.

Selected Proposed Regulatory Provisions

The HHS's proposed rule would require that "advertisements for certain prescription drug or biological products on television…must contain a statement or statements indicating the Wholesale Acquisition Cost (referred to as the 'list price') for a typical 30-day regimen or for a typical course of treatment…"4 The "price stated in the advertisement must be current as of the date of publication or broadcast."5 Also, "…manufacturers would be permitted to include an up-to-date competitor product's list price, so long as they do so in a truthful, non-misleading way."6

The proposed regulation provides an exception to the requirement "…for any prescription drug or biological product…that has a list price…of less than $35 per month for a 30-day supply or typical course of treatment." Because almost no newly approved drug or newly licensed biologic will meet this criteria, from our perspective, this exception is largely meaningless.

The proposed regulation also requires that the advertised price "be conveyed in a legible textual statement at the end of the advertisement" and that it be "placed appropriately and…presented against a contrasting background for sufficient duration and in a size and style of font that allows the information to be read easily."7

Enforcement

The notice does not include any "HHS - specific enforcement mechanism" in the proposed rule, but rather asserts that the Lanham Act provisions provide sufficient enforcement authority.8 Furthermore, because the U.S. Food and Drug Administration (FDA) has regulatory jurisdiction over prescription drug TV advertisements, it is likely that the FDA could assert a drug is misbranded, if the advertisement does not accurately set forth pricing information, or if the pricing information is false or misleading in any regard.

Conclusion

The HHS's proposed rule is part of a broader societal initiative to reduce the price to consumers of prescription drugs and biological products. But simply disclosing the list price of a medicine lacks context as to what it takes to bring a new medicine to market, the short patent life that attached to medicines, and the actual cost a patient pays for the medicine. The comments period for the proposed rule is open, and will close on December 17, 2018. All companies developing new medicines are encouraged to submit comments to the HHS. For questions about the proposed rule, or any FDA related question, please contact David Hoffmeister.

Charles Andres contributed to the preparation of this WSGR alert.


1 83 Fed. Reg. 52794 (Oct. 18, 2018).
2 Id. at 52790.
3 Id.
4 Id. at 52794.
5 Id.
6 Id.
7 Id.
8 Id.