By: Nick Bonds, Esq.
Pharmaceutical companies and rapidly rising drug prices have been eating up a lot of the oxygen in the conversation around healthcare costs. From pharmaceutical executives and PBMs testifying before Congress to President Trump’s May 9 remarks from the Roosevelt Room calling for Democrats and Republicans to unite in a legislative effort to end surprise medical bills.
But Congress and the White House are not alone in their endeavors to tamp down prescription drug costs, HHS Secretary Alex Azar and the CMS recently promulgated a new rule requiring pharmaceutical manufacturers to include the list prices of their drugs in their television ads. This push for transparency is the latest tactic in a multi-pronged strategy deployed by the Trump Administration to lower drug prices in the United States, including moves to change the system of rebates paid to PBMs and to restructure Medicare Part B. Outraged drug manufacturers cried foul, arguing that patients almost never pay their list prices and disclosing them in their commercials would lead to customer confusion.
Perhaps one of the most interesting components of this CMS rule is its enforcement mechanism. Instead of the CMS itself going after drug manufacturers who fail to comply, the rule allows other manufacturers to pursue damages and injunctions against them for claims of false or misleading advertising under Section 43(a) of the Lanham Act. Also known as the Trademark Act of 1946, this federal law relies on a “likelihood of confusion” standard for adjudicating trademark disputes. The Lanham Act and its remedies have been refined over the last 70 years to combat the very customer confusion pharmaceutical companies insist this new CMS rule will cause.
Whether you agree with drug manufacturers or the CMS, it’s worth noting that this is not the only situation where the government has turned to intellectual property law as a versatile tool to lower drug costs. A bi-partisan group of Senators, including Republicans Chuck Grassley and John Cornyn along with Democratic Presidential Candidate Amy Klobuchar, are working together on a package of legislation targeting drug pricing issues which they hope to have ready by summer. Cornyn’s bill takes a machete to the “patent thickets” crafted by drug manufacturers to artificially extend the monopolies on high-value “blockbuster” drugs granted them by their patents. These patent thickets make it all but impossible for cheaper generic drugs to reach the market, keeping the price of name brand drugs higher for longer. Legislators are coming to see these patent thickets as an abuse of our patent system, a system intended to spur and reward innovation.
It may be too early to say how effective intellectual property law will be in lawmakers’ fight against high drug prices, but it certainly looks like a trend to keep our eyes on. At the very least, it shows that Democrats and Republicans are willing to get creative, using every weapon in their arsenal in their fights with Big Pharma. And they’re willing to reach across the aisle to do it. If you think your own healthcare may be overcharging you for prescriptions, contact us for a claim negotiation, today!
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. This transparency will also help gain more specific information for claim negotiations. 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.