By: Philip Qualo, J.D.
The Centers for Medicaid and Medicare Services (CMS) has finalized yet another rule demonstrating the agency’s commitment for greater transparency in the healthcare industry. On May 8, 2019, CMS finalized the “Regulation to Require Drug Pricing Transparency”, which will require prescription drug manufacturers to provide the Wholesale Acquisition Cost for their products in direct-to-consumer television advertisements. Under the final rule, drug makers will have to post the list price of a typical course of treatment for acute medications like antibiotics or for a 30-day supply of medications for chronic conditions. These consumer ads will be required to have a readable, text statement at the end to comply with the mandate.
The rule also requires the Health and Human Services (HHS) secretary to maintain a public list of drugs that violate the rule. Drugs with list prices under $35 per month will be exempt from the requirement.
CMS estimates that approximately 25 pharmaceutical companies will be affected by this rule, as they run an estimated 300 distinct pharmaceutical ads on television each quarter. Complying with the rule is expected to cost drug makers $5.2 million in its first year and $2.4 million in subsequent years.
The regulation, which was initially proposed in October 2018, has faced major opposition from drug manufacturers. On December 17, 2018, the Pharmaceutical Research and Manufacturers of America (PhRMA) submitted comments in response to the then-proposed CMS rule arguing that disclosure of drug prices in television advertisements. PhRMA argued that the list price alone does not convey to patients meaningful information about how much they will actually pay for a medicine. Without providing additional context, such as a patient’s average, estimated, or typical out-of-pocket costs, disclosure of the list price in a direct-to-consumer advertisement could give patients the false impression that they are required to pay the full list price, rather than the copay or coinsurance that the patient is actually responsible for. They also argued that the new rule is unconstitutional on First Amendment grounds. Specifically, they believe that a government mandate on drug makers to disclose only the full list prices directly in their television ads would violate the First Amendment as "compelled speech."
One of the primary goals of this new regulation is to boost competition among drug manufacturers and provide them with incentives to lower their list prices. Greater drug price transparency will also provide new cost containment opportunities for employers who sponsor self-funded health plans and their respective Pharmacy Benefit Managers. The final rule will go into effect 60 days after it is published in the Federal Register.
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By: Brady Bizarro, Esq.
On February 26th, and again in early April, top executives from major pharmaceutical companies and PBMs testified before the Senate Finance Committee. The companies represented included Pfizer, Merck, John and Johnson, CVS, Express Scrips, OptumRx, and others. Led by Chairman Grassley (R-IA) and Ranking Member Wyden (D-OR), the Committee sought to address the problems of continued price increases, free loading, and price transparency. They also portrayed PBMs portrayed as the shadowy middlemen who may be making these problems worse through their increased use of rebates.
The hearings proceeded mostly as Q&A sessions. When asked whether the CEOs consider negative public opinion when setting list prices, all said yes, meaning price isn’t just a function of administrative or research and development costs. Their answer Implies that if no one got upset, prices would go up more. One senator pointed out that if Humira (a drug used to treat arthritis and Crohn’s disease) were its own company, the drug would be among the Fortune 500 companies all by itself, larger than General Mills, Halliburton or Xerox.
The drug manufacturers claimed to support the Trump administration’s proposed rebate reform rule. That rule as proposed applies to Medicare Part D rebates only (which are still very large). Senators are also developing bills aimed at reforming the rebate system. Two CEOs told the Committee that they would lower their list prices if the rebate ban was extended to the private market.
Between these two hearings (for the manufacturers and then for the PBMs), the drugmakers and PBMs essentially blamed each other for high prescription drug prices. Popular ideas discussed were potentially tying U.S. drug prices to international prices. There was also serious support for value-based purchasing arrangements (sometimes called risk-sharing agreements) that tie drug payments to patient outcomes. That would mean that if a particular drug fails to produced a particular clinical or financial outcome, a price reduction would be triggered or a refund. Senators noted that these arrangements are complicated because of anti-kickback laws and proposed rebate reform rules, though. In the end, all parties agreed that the status quo isn’t working for patients, payers, or society.