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CMS Finalizes Rule Requiring Disclosure of Drug Prices in TV Ads

Yesterday, May 8, 2019, the Centers for Medicaid & Medicaid Services (“CMS”) released its final rule requiring drug manufacturers to disclose a drug’s wholesale acquisition cost (“WAC”) in direct-to-consumer television advertisements.  The rule, which will become final 60 days after the official publication of the rule (which will be tomorrow, May 10, 2019) was proposed last fall.  Our prior summary of the proposed rule can be found here.

CMS is largely adopting the rule as published last fall with minor technical changes for clarification and one change relating to pre-emption of state law, which is addressed at a new 42 C.F.R. 403.1204(b).

Under the final rule, any television advertisement of a prescription drug that is paid for in whole or in part, directly or indirectly, under Titles XVIII or XIX of the Social Security Act (Medicare or Medicaid), must disclose in writing the drug’s WAC for a 30-day supply or regular course of treatment.  The disclosure requirement applies regardless of the care setting in which a drug is provided, but does not apply to drugs with WACs below $35 for an average course of treatment. The WAC to be disclosed in an advertisement must be accurate as of the first day of the quarter in which the advertisement will be run.

CMS received 147 comments in response to the proposed rule covering many topics.  The comments and CMS’s responses generally break down into five categories:

  1. Whether CMS has the authority to require the disclosure of prices in advertisements;
  2. Whether the requirement is inappropriate under First Amendment case law:
  3. Whether WAC is the appropriate number to be disclosed in an advertisement;
  4. Other technical issues regarding how to apply the requirements, such as what quantity of drugs the disclosure should be based on and what dollar limit should be the cut-off for when disclosure is required; and
  5. How the rule will be enforced.

Not surprisingly, CMS concludes that it has the authority to require the disclosure of WAC in TV advertisements and that such disclosure is not inappropriate compelled speech under First Amendment case law.

CMS devotes a significant amount of pages in the final rule to responding to comments on the issue of WAC and explaining why WAC is an appropriate figure to disclose in the advertisements.  CMS appears to recognize that no drug pricing metric will be perfect, but is confident that WAC is the best option to provide to consumers so that they can make more informed decisions regarding pricing than they do today.  CMS will continue to allow manufacturers: (1) to acknowledge in an advertisement that the cost to a patient may differ if the patient has health insurance that covers drug, and (2) to include up-to-date information regarding a competitor drug’s WAC so long as it is truthful and not misleading.

Interestingly, the “enforcement” mechanism that CMS adopts essentially puts the onus on competitor manufacturers to challenge other manufacturers.  CMS will, no less than annually, publish a list of drugs and biological products identified to be in violation of the rule.  CMS then believes that competitors will bring private actions against each other under the Lanham Act.

Also of note, the final rule includes a chart summarizing the 20 drugs on which manufacturers spent the most on direct-to-consumer advertising in 2016, the WAC for such drugs, and whether they are covered under Part B or D.  (That chart is at Table 1 in the final rule, here.)

Lastly, commenters and CMS raised multiple times that prescribers should have access to more beneficiary-specific cost-sharing information than they do today.  CMS references its proposal released last fall that seeks to require Part D plan sponsors to establish a system through which a prescriber can obtain real-time information regarding a drug’s cost, formulary placement and the beneficiary’s cost-sharing, referred to as the “real time benefit tool” (RTBT).  This may be signaling that CMS intends to move forward with its RTBT proposal.  

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Tara advises managed care organizations, pharmaceutical services providers such as PBMs, and integrated delivery systems, and companies that invest in them, on matters relating to compliance with federal health care program regulations, federal and state fraud, waste and abuse laws and plan benefits.