Nov. 19, 2018 – In a featured “Perspective” article in The New England Journal of Medicine (NEJM) this week, Stacie B. Dusetzina, Ph.D., and Michelle M. Mello, J.D., Ph.D., state that although providing cost information about prescription drugs is valuable, mandating that companies use the wholesale acquisition cost (WAC) in direct-to-consumer (DTC) ads “raises substantial public health and legal concerns.”

The article – written in response to an Oct. 15 proposed rule from the Centers for Medicare & Medicaid Services (CMS) requiring TV ads for a prescription drug or biologic to include the product’s WAC – states that although the proposal seeks to “preserve the potential benefits of [DTC] advertising while curbing its ill effects, … a potential unintended consequence of price disclosure may be to dissuade patients from seeking care because of the perception that they cannot afford treatment.”

“The Coalition believes price transparency is a positive thing, but that the current CMS proposal does not represent true transparency and that if it is pursued there could be several negative effects,” said Coalition for Healthcare Communication Executive Director Jon Bigelow. “The specific examples that authors Dusetzina and Mello cite, of drugs for which the WAC differs sharply from prices paid, for example, by Medicare beneficiaries, reinforce this point.”

“Many people viewing ads that include drug prices may not understand that they will never pay the list price – because they have insurance – or that there are other treatment options available to them,” Bigelow said. “So although the ad might have encouraged them to seek treatment, the price information may lead them to believe they cannot afford treatment when that likely is not the case,” he said.

An example of the complexity of listing the WAC in DTC ads is provided in the NEJM article, which states that the list price for Trulicity (dulaglutide) for type 2 diabetes is $730 per month, but Medicare-insured patients are likely to pay from $74 to $223 per month. Also, their physicians may choose less-costly treatments, such as metformin, which costs $4 per month for patients paying cash.

“Consequently, the proposal carries the risk of undercutting the main public health benefit of [DTC] advertising: reducing rates of undertreatment,” the authors state.

The article discusses other issues with the CMS proposal, such as the flaws of using the WAC, which is typically higher than what insured patients pay, as well as the legal concerns raised by mandatory disclosures that “impinge on commercial speech rights protected by the First Amendment.”

Specifically, the authors question whether the Zauderer standard, a deferential standard of review applied by courts in challenges to disclosures of “purely factual and uncontroversial” information related to an advertiser’s products or services, applies in this case. They also note that if Zauderer does not apply, then the Central Hudson standard would evaluate the government’s standing regarding the proposal, stating that although the CMS proposal is “narrowly tailored to the government’s substantial interest in reducing expenditures by CMS programs, it probably doesn’t satisfy the materials-advancement requirement” which courts have demanded from the government to show that the required disclosure “will effectively address the problem it targets.”

The authors conclude that three aspects of the CMS rule undercut the government’s position that the compelled disclosures will improve consumers’ decision making and curb drug spending:

1. Price information does little to inform consumer decisions if it inaccurately represents actual cost.
2. Consumers can already obtain information on cash prices online and their own cost from their insurer.
3. The rule contains no meaningful enforcement mechanism, calling into question whether companies will comply.

Although the authors assert that “cost should become a routine part of prescribing discussions with patients,” and that “providing salient cost information at the right time could help reduce drug spending while preserving patient choice,” they “believe that [DTC] advertising is the wrong vehicle.”

The article, entitled “Disclosing Prescription-Drug Prices in Advertisements–Legal and Public Health Issues,” is available at NEJM.org.