It’s the drug companies vs. HHS before an appellate court this week
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Trine K. Tsouderos
HRI Regulatory Center Leader, PwC USJanuary 17, 2020
Appellate court judges’ comments during a hearing this week seem to indicate that a second strike is imminent against the Trump administration requirement that pharmaceutical drugmakers post list prices in direct-to-consumer TV ads, according to media reports on the hearing.
At issue is whether Congress gave HHS the authority to force pharmaceutical companies to disclose the list prices of medications that cost more than $35 a month and are covered by Medicaid and Medicare.
The government is arguing that the CMS has broad authority to make rules necessary for the efficient administration of Medicare and Medicaid, and that lower pharmaceutical costs and drug price transparency would improve the programs’ efficiency.
But during the Jan. 13 hearing by a three-judge panel of the US Court of Appeals for the DC Circuit, Judge Harry Edwards said he doesn’t understand the connection between the price disclosure rule and efficient administration of the programs, according to Modern Healthcare.
Edwards’ comments echo the argument made by US District Judge Amit P. Mehta when he invalidated the regulation in July. Mehta wrote that although Congress gave HHS broad regulatory authority over Medicare and Medicaid, it didn’t include the power to regulate prescription drug marketing or oversight of market actors, including drugmakers, that aren’t direct participants in the two health insurance programs.
Nor did Congress include list price disclosure in any of the federal laws regulating direct-to-consumer pharmaceutical advertising, Mehta added.
At this week’s hearing, Judge Patricia Millett questioned another pillar of the administration’s argument: that posting list prices would increase transparency, and thus efficiency. Millett asked, according to Modern Healthcare: “Is there any economist that says that price transparency that is not the price people will pay improves efficiency in this sense?”
Her question reflects a point made by the plaintiffs – several drug companies that advertise on television and the Association of National Advertisers. They argue that consumers would be confused because people rarely pay the list price for their medications on account of insurance coverage and patient discounts.
HRI impact analysis
While television is the dominant method of promoting pharmaceutical products, according to an analysis by Kantar Media, a relatively small number of products are touted in these ads. For these products, if the rule survives its court challenge, companies may shift some of their ad spend from spots promoting specific products to ones aimed at disease awareness.
Companies also could transfer some of their marketing budgets away from direct-to-consumer TV spots toward more hands-on patient engagement efforts. The rule also may prompt some companies to look toward social media or online ads, which are not covered by the proposed rule.
Regardless of the case’s outcome, the drug price transparency rule — first floated in May 2018 — has made an impact. In October 2018, the Pharmaceutical Research and Manufacturers of America added a provision to its voluntary policy that direct-to-consumer television ads should mention where patients can find cost information, including medication list price and average, estimated, or typical patient out-of-pocket costs.
In the first half of 2019, the three pharmaceutical company plaintiffs launched price transparency policies for TV ads. Some companies began adding to their ads websites or toll-free numbers that patients could call to get list prices and other cost information. Others offered a visual representation of list price and typical monthly outpatient costs.