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Drug Pricing in Television Advertisements

Welcome back. In this issue, we are going to discuss a recent rule set forth regarding drug pricing featured in television advertisements.

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In May 2019, the U.S. Department of Health and Human Services (HHS) issued a rule intended to improve price transparency for pharmaceutical products. The rule requires that the “list price” for the advertised product be disclosed on all direct-to-consumer television advertisements. This rule applies only to television ads and does not affect radio or print advertisements. The rule also defined the “list price” to be what is referred to as Wholesale Acquisition Cost (WAC), which must be disclosed if the product has a cost of $35 or more, for either a 30-day supply or typical course of therapy.

There have been some concerns regarding this rule as WAC may cause some confusion because most consumers will not pay this price. A good analogy is to think of WAC as equivalent to the sticker price on a new vehicle; not usually what you pay, but something to use as a comparison. Consumers who are covered by a prescription drug plan could pay varying amounts based on things like contractual discounts, formulary placement and deductibles. Consumers may also have access to manufacturer assistance programs that would lower out-of-pocket costs.

The rule was scheduled to go into effect on July 9, 2019, but some pharmaceutical companies have challenged the validity of the ruling. This challenge is based on the questioning of the statutory authority of HHS to implement such a rule and the violation of the First Amendment of the U.S. Constitution. The matter was then put in the hands of the U.S. District Court for the District of Columbia.

On July 8, 2019 the judge in the lawsuit issued a decision that favored the pharmaceutical companies, agreeing that HHS does not have the statutory authority to require pricing to be disclosed. This was an appealable decision, so HHS could decide to pursue an appeal in the future, but at this time pharmaceutical companies will not be required to disclose pricing in direct-to-consumer television advertisements.

It will be interesting to see what the next step for HHS is, as concerns over drug prices continues to be a hot topic. Although WAC may not be the best method of measuring what a patient or health plan may pay for a medication, it does provide a uniform reference point across all products. As more and more medications come to market, education across the entire health care industry will be important to ensure the most cost-effective medications are being used.

Thanks for visiting, and see you next month at the Corner!

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