Drug companies, which have learned to live with advertisements calling out a litany of possible side effects for their drugs, may want to take a couple of aspirin. The recent announcement by CMS that it will require drug companies to disclose the wholesale acquisition cost of drugs they promote in direct-to-consumer TV ads will, if finalized, only serve to confuse consumers and compel speech. Convincing CMS not to finalize the proposed rule will not only relieve pharma’s latest headache, it will protect consumers and the Constitution as well.
While making drug prices more transparent is a laudable goal, compelling the disclosure of a drug’s list price in TV ads will no more help consumers understand what they will ultimately pay for a medication than had CMS required the use of a randomly generated three-digit number as the advertised price.
Instead, disclosure of the list price will serve to mislead and harm patients. And, for those who still care about such things, compelling drug companies to engage in government-required speech violates the First Amendment.
The First Amendment prohibits the government from compelling companies to engage in speech to convey a particular message favored by the government.
The Supreme Court has long held that the Constitution limits the government’s ability to regulate the content of speech by forcing companies to communicate particular pricing information to consumers and others.
As a result, laws that compel speech -- including those that regulate how sellers may communicate their prices -- are subject to heightened judicial scrutiny. Those laws are permissible under our Constitution only if they are narrowly tailored to serve an especially compelling governmental interest.
To state the obvious, the government does not have a compelling interest in requiring speech that is both irrelevant and misleading, particularly when it could harm patients, yet that is precisely what the proposed rule would do.
There is simply no compelling government interest in requiring pharma companies to disclose the list price of drugs they advertise.
CMS knows a drug’s wholesale acquisition cost has little bearing on what price consumers actually pay out-of-pocket for medication.
List prices are subject to a full range of potential rebates and discounts. After those adjustments have been applied, actual costs depend on consumers’ insurance plans, including co-pay and deductible requirements, as well as their eligibility to participate in third-party co-pay and assistance programs, such as those operated by pharmaceutical companies.
By mandating pharmaceutical companies to post irrelevant and misleading pricing information in their TV ads, there is a serious risk that patients will be confused and dissuaded from filling prescriptions for therapeutically important medications.
Indeed, patients may be deterred from using essential drugs with high list prices in favor of taking less effective products -- or none at all -- even though the patients themselves would face little to no actual out-of-pocket costs for the drugs.
In short, there is simply no compelling government interest in requiring pharma companies to disclose the list price of drugs they advertise.
Moreover, the government’s proposed rule is not narrowly tailored. Under the HHS umbrella sit a number of federal agencies.
Tellingly, it was CMS, not FDA, that proposed the rule, so the government interest is not related to drug safety, but instead is focused on the communication of pricing information to Medicare Part D beneficiaries.
CMS does not need to take over a pharmaceutical company’s advertising to disseminate pricing information to this group. It has numerous other ways to disseminate such information.
In attempting to explain why the compelled speech is narrowly tailored and not unduly burdensome, it appears that CMS is unaware that its sister agency, FDA, imposes requirements on drug advertising to ensure it includes a fair balance of risk and benefit information.
For example, CMS asserts that, aside from disclosure of the list price at the end of a drug ad, pharma companies have the rest of the ad to convey other information of their choosing about the drug.
FDA, however, requires that certain detailed risk information (referred to as the Major Statement) be included in advertising. It is not uncommon for the Major Statement to take up to 30 seconds. Thus, if the CMS-mandated disclosure takes another 5-10 seconds (as it must appear on the screen long enough to be read), then in reality there is very little time for the company to “convey other information of its choosing,” including the actual benefits of the product.
CMS’s apparent unfamiliarity with FDA’s regulation of drug advertising is nicely illustrated by its suggestion that pharma companies should actually welcome the opportunity to include list prices because they can use the occasion to also include the (presumably higher) price of competitors’ products.
FDA, however, is of the view that including a competitor’s drug prices in an ad is almost always inherently misleading for reasons noted above, i.e., it’s impossible to include all the factors that will accurately describe how much a person would ultimately pay for two competing drug products.
Requiring disclosure of list prices in TV drug advertising is ill-conceived and unconstitutional and, if challenged in court, it will be CMS that needs the aspirin.
There are myriad better ways to inform patients about the cost of their drugs, such as having them contact their insurance provider or pharmacist. Thankfully, that goal can be achieved without misleading consumers and trampling the First Amendment.
Sheldon Bradshaw is a partner at King & Spalding. He previously served as a deputy assistant attorney general in the Department of Justice’s Office of Legal Counsel and as chief counsel of the FDA during the George W. Bush administration.
U.S. Department of Health and Human Services (HHS), Washington, D.C.
U.S. Centers for Medicare and Medicaid Services (CMS), Baltimore, Md.
U.S. Food and Drug Administration (FDA), Silver Spring, Md.