Big pharma: Trump rule mandating drug prices in TV ads might be unconstitutional

The Trump administration’s proposal to require prescription drug manufacturers to disclose prices in TV ads may be primed for legal challenges.

The rule proposed Monday would require ads for drugs paid for by Medicare or Medicaid to include the “list price” or Wholesale Acquisition Cost for products costing more than $35 for a month’s supply. That proposal announced by Health and Human Services Secretary Alex Azar is part of an effort by the Trump administration to lower drug prices.

PhRMA, an organization that represents many of the world’s largest drug manufacturers, including Pfizer Inc., Johnson & Johnson, Bayer Corp., Abbvie, Merck & Co., and AstraZeneca, said forced price disclosures could violate the First Amendment’s protection against compelled speech.

“We believe including the list price in DTC television advertisements without additional context is misleading and that there is a better way to provide patients with medicine cost information,” said Holly Campbell, PhRMA’s Deputy Vice President of Public Affairs.

What’s changing?

Current law under the Food, Drug and Cosmetics Act requires that direct-to-consumer (DTC) advertisements spell out a drug’s “major risks,” plus provide resources to a full list of risk factors.

U.S. consumers are no strangers to the law’s impact. It’s responsible for the mouthful of risk factors rattled off during certain prescription drug commercials — warnings like increased risk of death, stroke, seizures, high fever, stiff muscles, confusion, extreme high blood sugar, dizziness, trouble swallowing, even frequent thoughts of suicide — just to name a few.

The Trump administration hypothesizes that adding the list cost of prescription drugs to ads will drive down industry prices.

“Right now, drug companies are required to disclose the major side effects a drug can have—but not the effect that buying the drug could have on your wallet,” HHS said in its announcement.

Patients without insurance, and those who must pay out of pocket until deductibles kick in, may see value in knowing the list price of an advertised drug.

The cost for a supply of 100 Xanax oral tablets at 0.25 mg, for example, is around $426. Disclosure of the price, prorated to represent a monthly supply cost absent rebates and insurance, would be required under the proposed rule.

Critics say the law would violate the Constitution

Financial impact on consumers may not be reason enough to impose additional regulation, though. Critics argue that the proposed rule amounts to an unconstitutional regulation of free speech, and reaches beyond statutory limitations.

The FDA’s statutory authority gives it power to ensure ads are neither false nor misleading, and requires ads to contain fair balance of a drug’s risks and benefits. The statute also requires the ad to include both information that’s “material” to the drug’s advertised use, and risks contained on the product’s label.

PhRMA said in a statement to Yahoo Finance that it is still reviewing the administration’s proposal, but believes the proposal falls short. 

“We believe including the list price in DTC television advertisements without additional context is misleading and that there is a better way to provide patients with medicine cost information,” said Campbell.

Hours before the administration’s announcement Monday, PhRMA announced plans saying its members would begin its own version of supplementing television ads.

The organization, which spent $15.5 million on lobbying in the first six months of 2018, said its members’ DTC television advertisements “will soon direct patients to information about medicine costs, including the list price of the medicine, out-of-pocket costs or other context about the potential cost of the medicine and available financial assistance.”

Brian Newell, Director of Communications for biotechnology advocacy group Biotechnology Innovation Organization (BIO), said that the administration’s proposal, absent inclusion of cost-influencing factors, could keep consumers in the dark.

“At a time when patients need more meaningful transparency, this proposed rule threatens to sow confusion among patients and potentially deter them from seeking care,” Newell said.

“Meaningful transparency should shed greater light on how insurance companies and middlemen determine what patients pay out-of-pocket for prescription drugs, as well as which medicines are covered by health plans and at what cost to patients.”  

BIO says policymakers should reject the HHS approach, and instead work on a holistic solution that empowers patients to make informed health care decisions.

Yahoo Finance reached out to HHS Secretary Alex Azar for comment Tuesday and did not receive an immediate response.  

Alexis Keenan is a reporter for Yahoo Finance.

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