Ad Price Disclosure ‘Ill-Conceived, Illegal’: WLF
Writing in a Washington Legal Foundation Legal Opinion Letter, Seton Hall University School of Law professor Howard Dorfman says that while the Centers for Medicare and Medicaid Services (CMS) may want to empower patients and lower prescription drug costs, its proposed rule to require drug companies to include a drug’s wholesale acquisition cost in direct-to-consumer television ads “not only fails to directly address these issues, it violates the First Amendment and the Administrative Procedure Act. Further, exposing consumers to misleading or false price information will erode the physician-patient relationship, a vital component of our already challenged healthcare system.”
Dorfman says CMS acknowledges that Congress has never expressly granted it the authority to require disclosure of drug prices. While the agency suggests it has the authority from the Social Security Act on the basis that price disclosure is necessary for the efficient operation of the national reimbursement process for prescription drugs, Dorfman reviews what he says are several major flaws in the CMS legal analysis.
And, he says, even if one argues that CMS has the legal authority, its proposal violates the First Amendment. “CMS argues that the requirement merely demands disclosure of factual, non-controversial information that helps consumers make a choice,” he writes. He says that there can be an exception for corrective disclosure of misleading speech, but a DTC ad that fails to inform consumers about a drug’s price is not misleading and thus a disclosure rule is not needed to alleviate consumer confusion. And, he adds, any representation that the wholesale acquisition cost is the actual price consumers pay is misleading or false, and thus a potential source of confusion if published.
Dorfman explains that the drug pricing process in the U.S. includes a combination of discounts, independent third-party entities, various financial programs, and other factors. He says CMS is aware that the system’s complexities render the wholesale cost essentially meaningless to the average consumer, who is highly unlikely to pay the “sticker price.”
According to Dorfman, adding the information to TV ads “could completely obscure the positive treatment information, redirecting consumers’ attention to what is likely a vastly inflated cost. Perhaps this is CMS’ actual goal — imposing ‘sticker shock’ on consumers that may force manufacturers to lower their prices. Consumers who are confused by the price and concerned with costs would be less likely to seek professional care. Since studies have shown that DTC advertising can motivate patients to access care and potentially have asymptomatic conditions diagnosed, any regulation that could impede such access will have severe consequences for patient care and societal health."