The Trump administration proposed requiring drugmakers to include the list prices of their medicines in television advertisements aimed at consumers. But health policy experts and Wall Street analysts questioned the federal government's authority to take such action and how it would enforce its new proposed rule.
In its proposal, which was posted online on Oct. 15 three days ahead of its publication date, Health and Human Services argued that "not only does transparency promote a more competitive environment, but data indicate that it will likely motivate manufacturers to be less willing to raise prices, which have dramatically increased over the past decade."
"Patients deserve to know what a given drug could cost when they're being told about the benefits and risks it may have," HHS Secretary Alex Azar said during an Oct. 15 address at the National Academy of Medicine in Washington. "They deserve to know if the drug company has pushed their prices to abusive levels. And they deserve to know this every time they see a drug advertised to them on TV."
The Centers for Medicare and Medicaid Services, part of HHS, is charged with carrying out the regulation. The public has 60 days to comment on the proposed rule.
Under the proposal, brand-name biopharmaceutical manufacturers must include in broadcast ads the list price for a 30-day supply of any medicine whose cost is over $35 and is covered by the federal government's Medicare program for seniors and the disabled and Medicaid, which covers the poor.
Rules was expected
The proposed rule had been expected since August, when a notice was published online acknowledging the regulation was under review at the White House Office of Management and Budget.
President Donald Trump also had included the idea in his strategic plan to lower drug prices, which he unveiled in May.
The U.S. Food and Drug Administration was tasked under the May plan to evaluate whether it was feasible to require manufacturers to include list prices in their ads.
It remains unclear what the FDA found, but on Twitter, Commissioner Scott Gottlieb noted on Oct. 15 that his agency "plays an important role in regulating the information about the safety and effectiveness of prescription drugs in advertising and promotion."
HHS acknowledged, however, that "Congress has not explicitly provided" the agency "with authority to compel the disclosure of list prices to the public," but lawmakers have "explicitly directed HHS to operate Medicare and Medicaid programs efficiently."
"Promoting pricing transparency, and thus efficient markets, for drugs funded through those programs falls within the scope of that mandate," the HHS stated.
It said it has determined that the proposed regulation was "necessary to the efficient administration of the Medicare and Medicaid programs."
Not waiting for industry to act
While markets typically evolve on their own, "sometimes it takes government to make the first move, to disrupt a broken system and lay down new rules of the road," Azar said. "We will not wait for an industry with so many conflicting and perverse incentives to reform itself," the U.S. health chief — a former drug company executive — told representatives from the biopharmaceutical, insurance, public advocacy, biomedical research and regulatory sectors gathered at the conference.
The industry, however, had tried to get in front of HHS' proposal with its own voluntary plan, though drugmakers were not willing to directly disclose their list prices in ads and only pledged to point consumers to websites and other resources where they may find publicly available information.
The Pharmaceutical Research and Manufacturers of America argued that requiring companies to include list prices in their TV commercials raised concerns about the industry's rights under the First Amendment of the U.S. Constitution.
But HHS said requiring television ads to disclose pricing information to consumers was "consistent with First Amendment jurisprudence."
It noted that "courts have upheld required disclosures of factual information in the realm of commercial speech where the disclosure requirement reasonably relates to a government interest."
But Rachel Sachs, associate professor of law at Washington University in St. Louis, said she was skeptical.
While the FDA has broad authority over biopharmaceutical advertising, Sachs noted the administration is relying on CMS' authority.
Regulations that try to regulate marketing more broadly need greater justification, Sachs wrote on Twitter. The administration also has not proposed any mechanism for enforcing its regulation, she said.
Sachs also questioned the administration's arguments that the transparency of the list prices in drug ads would lead to lower prices or spending.
"HHS is moving forward with a rule of dubious effectiveness that is certain to face litigation," Sachs said. "It is a choice to spend their time here and not in other areas of drug pricing."
Cowen & Co. analyst Rick Weissenstein also doubted the proposed rule would have any effect on lowering prices or patients' costs.
"It's unclear what patients can or will do with the information," Weissenstein said in an Oct. 15 research note.
The list prices are already published by CMS and it is unlikely many beneficiaries would change their course of treatment based on the inclusion of that information in drug ads, he said.
"Most beneficiaries with means have insurance that already reduces the [list] price, while those that might be paying cash are unlikely to have the means to buy the drugs out of pocket anyway," Weissenstein said.
He also doubted the inclusion of the list prices in drug ads would change prescriber behavior or the tenor of the debate in the U.S. overall.