On October 15, 2018, the Centers for Medicare & Medicare Services (“CMS”) in the Department for Health and Human Services proposed a rule to require prescription drug manufacturers to post the Wholesale Acquisition Cost (“WAC”) for drugs and biological products covered by Medicare or Medicaid in direct-to-consumer television advertisements. The WAC reflects the manufacturer’s list price for a drug to direct purchasers, not inclusive of any discounts or rebates. CMS is proposing this rule in the context of broadcast advertisements, an area in which the Supreme Court has recognized that the government may take special steps to help ensure that viewers receive appropriate information.^[1]

CMS stated that 47 percent of Americans have high-deductible health plans and that many patients may pay the list price of the drug until they meet their deductible. The proposed rule aims to provide greater transparency into the prices charged by prescription drug manufacturers. The theory is that markets operate more efficiently with greater transparency, and that increased exposure of the list price will also provide a moderating force to discourage price increases. While wholesale prices do not equate to the patient’s out-of-pocket obligation, CMS asserts that benefit designs are impacted by WACs, and patients in high-deductible plans may pay the full list price until meeting their deductible – thus, the WAC may still be relevant to many patient and impact their decisions and market dynamics. The price required to be posted would be for a typical course of treatment for an acute medication like an antibiotic, or a thirty day supply of medication for a chronic condition that is taken every month. The posting would take the form of a legible textual statement at the end of the ad and would not apply where the list price for a thirty day supply or typical course of treatment of a prescription drug was less than $35.

Overall, the agency has taken action designed to promote transparency in healthcare this year. In the drug pricing arena, CMS released a redesigned version of the Drug Spending Dashboards which identifies manufacturers that have increased their prices, along with year-over-year information on drug prices. Outside of the drug pricing space, CMS recently launched the eMedicare initiative to allow customers to find and compare Medicare coverage options and quickly see estimates on what the coverage would cost, among other features. CMS has also included requests for information on cost transparency and expanded patient access to data in recent payment rules, and is expected to propose more new policies in an upcoming regulation currently under OMB review.

CMS’s proposal is part of an ongoing effort by the Trump administration to bring down prescription drug prices and out-of-pocket costs, as signaled by the release in May of American Patients First, the administration’s drug pricing blueprint. This is also the latest in a series of steps focused on increasing data access and price transparency in healthcare. Although Congress was not successful in its attempt to address direct-to-consumer advertising this summer through a provision that would have allocated $1 million to the Food and Drug Administration to implement regulations requiring drug companies to list their prices in TV ads, Congress passed and the President signed into law legislation to improve transparency and lower health care costs for patients across the country. This law effectively paves the way for pharmacists to advise their patients on the cost of various medications and different payment methods, free from restrictions imposed by take-it-or-leave-it contracts with insurers.

In the present proposal CMS seeks public feedback on a variety of questions, including:

• How providing consumers with the list price of a medication may influence interactions with prescribers, the selection of drug products, and the perceived efficacy of the prescribed drug.
• How benefit design influences these choices.
• Whether compliance with rule should be a condition of payment by a federal health care program.
• Whether WAC is the amount that best reflects the “list price” for the stated purposes of price transparency and comparison shopping
• Whether 30-day supply and typical course of treatment are appropriate metrics for a consumer to gauge the cost of the drug.
• How to treat an advertised drug that must be used in combination with another non-advertised drug or device.
• Whether the cost threshold of $35 to be exempt from compliance with this rule is the appropriate level and metric for such an exemption.
• Whether rule should be extended to advertisements in other media forms, including radio, magazines, websites, etc.

This rulemaking presents a major opportunity for pharmaceutical companies, insurers, and patients alike to make their voices heard in an area that is critically important. Electronic comments can be submitted until December 17, 2018. For further assistance, please contact Jodi Daniel (jdaniel@crowell.com), Barbara Ryland (bryland@crowell.com), and Maya Uppaluru (muppaluru@crowell.com).

^[1] See Red Lion Broad. Co. v. FCC, 395 U.S. 367, 390, 394 (1969) (“It is the right of the viewers and listeners, not the right of the broadcasters, which is paramount.”)