HHS Finalizes Rule Requiring Manufacturers Disclose Drug Prices in TV Ads: Requires Ads to Include WAC List Price

On May 8, 2019, the Department of Health and Human Services (“HHS”) announced a final rule that will require direct-to-consumer television advertisements to include the list price for prescription pharmaceuticals that are covered by Medicare or Medicaid. The rule, which was promulgated through the Center for Medicare & Medicaid Services (“CMS”), requires the “the Wholesale Acquisition Cost” (i.e., the list price) of the drug to be included in the advertisement if the price is $35 or more for a one-month supply, or for the usual course of therapy.

Television advertisement of pharmaceutical drugs, which is regulated by the US Food & Drug Administration (“FDA”), remains a controversial topic. Prior to 1999, the pharmaceutical industry viewed the regulations as onerous and unrealistic, and argued that the requisite risk disclosures did not add value to the consumer (because the consumer didn’t actually read them). In 1999, the FDA changed the regulations, providing manufacturers with more flexibility in how to comply with the disclosure requirements. As a result, there was a dramatic increase in prescription pharmaceutical advertising. The industry argued that this would culminate in a more informed and healthy population, and would encourage patients to seek the advice of their physicians about neglected health matters. Critics of the advertising regulations argued that this would result in an increase in clinically inappropriate prescriptions, and contribute to drug price increases.

This new CMS rule requires that advertisements for certain prescription drugs or biological products on television (including broadcast, cable, streaming and satellite) contain a “textual statement” indicating the Wholesale Acquisition Cost (referred to as “WAC” or the “list price”) for a “typical 30-day regimen or for a typical course of treatment, whichever is most appropriate, as determined on the first day of the quarter during which the advertisement is being aired or otherwise broadcast.” The statement is as follows: “The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.” It is important to note that the rule only applies to television advertisements, but not advertisements through other platforms, such as YouTube or Facebook.

In announcing the rule, HHS noted that the ten most commonly advertised prescription drugs have list prices ranging from $488 to $16,938 per month or the usual course of therapy. HHS also noted that patients without health insurance or with high-deductible health plans pay all of that amount, while other patients with more comprehensive health coverage pay some fraction of it. HHS added that “[p]atients who are struggling with high drug costs are in that position because of the high list price that drug companies set,” and further that the inclusion of list prices in direct-to-consumer advertising will create incentives to lower list prices, incite competition among drug manufacturers, and result in patients who “will be better able to make informed decisions and demand value from pharmaceutical companies.”