***Further update – Federal Court Vacates Rule***

Yesterday, U.S. District Court for the D.C. Circuit Judge Amit Mehta invalidated the final rule.  In ruling on the merits, Judge Mehta said the Department of Health and Human Services went beyond its rulemaking authority.   Specifically the ruling states, “[n]either the Act’s text, structure, nor context evince an intent by Congress to empower HHS to issue a rule that compels drug manufacturers to disclose list prices. The Rule is therefore invalid.”.

HHS did not say what its next steps might be.

***Update- Final rule released***

Yesterday HHS released the final rule which takes effect in 60 days.  The final rule made some technical changes and one notable change, that state law-based claims that depend “in whole or in part on any pricing statement required by this rule” are preempted. 

Yesterday, the Department of Health and Human Services (“HHS”) through the Centers for Medicare and Medicaid Services (“CMS”) released a proposed rule that would require “direct-to-consumer (DTC) television advertisements of prescription drugs and biological products for which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or “list price”) of that drug or biological product.”    This proposal came hours after PhRMA tried a preempt strike  by releasing its own set of DTC guidelines.  See our post about the PhRMA’s “Guiding Principles” here.

Yesterday’s proposal from HHS is the latest salvo in the federal government’s effort to gain greater price transparency for prescription drugs and biologics.  The idea for requiring disclosing list price in advertisements appeared in the Administration’s May 2018 Blueprint for lowering costs.  Interestingly, that proposal had the Food and Drug Administration rather than CMS, leading the charge. In addition, Sen. Chuck Grassley (R-IA), and Sen. Dick Durbin (D-IL), introduced an amendment to the Fiscal Year 2019 Labor-HHS-Education appropriations bill that provided $1 million to implement proposed rules requiring manufacturers disclose list price in DTC advertising.  Note, the Grassley-Durbin language did not make it into the final appropriations bill.

Specifically, yesterday’s proposed rule will add “a new subpart L to part 403 to title 42 that would require that for prescription drug and biological products that can be reimbursed directly or indirectly through or under Medicare or Medicaid, DTC ads on television (including broadcast, cable, streaming, and satellite communication) for such products must include the product’s current list price, defined as the Wholesale Acquisition Cost.”  The proposed rule gives an example of how the price disclosure would appear in a DTC ad:

“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.”

HHS believes that DTC advertising “appears to directly affect drug utilization” which in turn has patients “demanding costly drugs and biological products based on advertising messaging, with a resulting increase in government spending.” HHS feels that arming patients with additional pricing information “may result in the selection of lesser cost alternatives, all else being equal relative to the patient’s care.”

The proposal could face legislative and legal headwinds.  First, HHS concedes that Congress has not given HHS explicit authority for creating a requirement to disclose prices to the public.  Rather, the proposed rule states that Congress “has explicitly directed HHS to operate Medicare and Medicaid programs efficiently.”  While HHS maintains that requiring manufacturers to disclose pricing to the public is “efficiently” operating Medicare and Medicaid, the term is not defined and could open up legislative avenues for those seeking to block the rule based on clear authority.   Second, mandating price disclosure could raise First Amendment questions regarding compelled speech.  The proposed rule speaks to First Amendment questions by stating that the requirement “consists of purely factual and uncontroversial information about a firm’s own product, namely the list price of the drug or biological product.”  No organization has indicated they would challenge the proposal on First Amendment grounds, but PhRMA did raise concerns about compelling speech in their comment to the Administration’s Blueprint.

The proposed rule is scheduled to be published on October 18th, and the comment period will run for 60 days.  With the cost of health care a hot topic of the fast-approaching 2018 midterm elections and a new Congress set to begin work in January, this is likely not the last we will hear on drug pricing.  We will be monitoring this issue closely.

Posted by Vince Sampson