CMS to Drug Makers: Put Your Prices in TV Drug Ads

Drug makers may soon have to include the list prices of drugs in television ads aimed at U.S. consumers.

The Centers for Medicaid and Medicaid Services (CMS) today posted a draft of regulations that would add price disclosure requirements for TV ads promoting prescription drugs and biological products.

The disclosure requirement would apply to any product covered, either directly or indirectly, by either Medicare or Medicaid.

(Related: Measure That Would Put Prices in Drug Ads Moves Forward)

CMS — an arm of the U.S. Department of Health and Human Services — is preparing to publish a draft of the regulations in the Federal Register on Thursday.

A preliminary version of the text is available here.

What’s in the TV drug ad price disclosure proposal?

The proposed regulation would affect an organization that advertises a prescription drug or biological product covered by either Medicare or Medicaid on TV.

The proposed regulation would not affect organizations advertising over-the-counter drugs covered by Medicaid.

The proposed regulation would require an affected organization that advertises a prescription drug or biological product to include “the product’s current list price, defined as the wholesale acquisition cost.”

Medicare or Medicaid plans pay most of the cost of expensive drugs for consumers with Medicare or Medicaid coverage, but officials say in the introduction to the draft regulations that they want consumers to hear what the full list price of drug advertised on TV.

“List price plays a role in negotiations between payors, pharmacy benefit managers (PBMs), and manufacturers, which all impact beneficiary cost sharing,” CMS officials write in the introduction to the proposed regulation. “A PBM could have ten different clients with 10 different benefit designs and it would be possible that an employee from each client could get the exact same product and all 10 could pay a different price.”

Even though typical beneficiaries get drugs for discounted prices, some do end up having to pay the full price, and the current system gives drug makers no incentive to disclose a drug’s full list price, to compete based on list price, or to hold down the list price, officials say.

What are CMS saying about the regulations?

CMS officials say they believe they have legal authority to impose the price disclosure requirements through statutory provisions that require them to operate the Medicare and Medicaid programs efficiently.

Drug makers spent $4.2 billion on direct-to-consumer TV advertising in 2017, and $1.3 billion on other types of direct-to-consumer advertising, officials say, citing figures from Kantar Media Advertising Intelligence.

Direct-to-consumer “advertising appears to directly affect drug utilization,” officials write. “Studies show how consumers exposed to drug advertisements can exert sufficient pressure on their physicians to prescribe the advertised product. In one recent survey, one in eight adults (12%) said they were prescribed a specific drug after asking a doctor about it as a result of seeing or hearing an advertisement.”

Today, many practical barriers keep consumers from getting drug pricing information, officials say.

Officials estimate their proposed regulation would affect about 25 pharmaceutical companies, and about 300 TV ads every three months. They predict the rule would result in the expenditure of more than $150 by private-sector organizations in at least one year.

What are the drug makers saying?

The drug makers’ trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), today tried to ward off the proposed regulations by announcing that PhRMA members had agreed to put more information about drug costs in their direct-to-consumer TV ads.