Preparing for Pricing in DTC TV

UPDATE 2: On August 21, 2019, the government filed a notice of appeal in this case.

UPDATE: On July 8, 2019, the judge in the pending litigation described below issued an order setting aside the CMS rule. The full opinion is available here.

If nothing changes, the new rule about including drug pricing in TV ads from CMS will go into effect one week from today on July 9, 2019.

There are a few wrinkles to keep in mind as we approach this deadline. First, there's a lawsuit pending that could delay the rule's implementation. Second, the operational challenges of abiding by the rule are the biggest hurdle including the expanded 2253 filing requirements. Third, the rule's scope is still unclear. Fourth, the rule doesn't preclude or preempt the PhRMA Principles change from April. Finally, the overlapping but non-identical scope of the rules could lead to some confusion and compliance hiccups. This post addresses each of these points in turn.

Pending Litigation

As I noted in a previous post, several pharmaceutical companies along with the Association of National Advertisers filed a complaint seeking to overturn the CMS rule. The full complaint is available here. The plaintiffs have filed a motion to stay the rule's implementation, and the judge has set a date of July 8 for issuing a decision. So, it is possible that companies will not actually be required to include their drug pricing in TV spots on July 9; however, as a practical matter, companies airing spots on July 9 and soon thereafter have most likely already developed them with the required pricing information included. 

All promotional materials for prescription drugs, biologics, and vaccines must be submitted to the FDA at time of initial dissemination or publication, so the FDA has most likely already begun receiving submissions of TV spots that include the information, and it is unlikely that a company would go to the time and expense of producing two versions of their TV spots (one with the pricing and one without) and submit both the FDA, only to determine on July 8 which spot to air the next day. Consequently, even if the judge issues a stay on the rule, there's a good chance that you'll see at least a few TV spots featuring pricing on July 9.

And that points to one of the issues the rule raises: operational challenges.

Operational Challenges 

Adding a line of copy to a TV ad is not a massive creative endeavor, and because the rule only requires the copy to appear on screen for a long enough time to be read, there are no audio implications, but the CMS rule requires that the pricing information presented is kept up to date. Specifically, the new rule requires that the pricing information provided be:
"as determined on the first day of the quarter during which the advertisement is being aired or otherwise broadcast." 42 CFR 403.1202 (not yet live on the code of federal regulations itself).

That means the pricing information must potentially be updated every quarter. Of course, most companies don't change their drug pricing quarterly, but it is common to have pricing updates twice per year. So, every time a company changes its pricing, it will have to determine what ads are currently airing and whether the pricing updates affect those ads. If the pricing changes affect the ads, then the ads will have to be updated. An updated TV ad both means an expense for the advertiser, but it also means a new 2253 filing with the FDA because updated materials must be resubmitted to the Agency.

And that means that the media buyers placing the ads will have one additional wrinkle to keep in mind as they manage the ad placements. They'll need to make sure that as new pricing comes into affect and ads are updated that the old ads are removed from the rotation, lest they be placed on CMS's naughty list.

That operational challenge is compounded by the fact that the scope of the rule is unclear, so it's not currently possible to say exactly what ads must include drug pricing.

Rule Scope Unclear

As I noted in a previous post, CMS made it clear that the requirement to include pricing does not apply to ALL direct to consumer (DTC) ads, but only to a limited subset of DTC ads. Specifically, the new requirement applies to only ads that appear on broadcast, cable, satellite, and streaming television. Unfortunately, CMS never explained what "streaming television" is. I tried to find a definition somewhere but wasn't able to do so. This matters because there are tons of DTC video ads that MIGHT be considered subject to the rule that are definitely not presented on "broadcast, cable, or satellite television."

Because of this scope unclarity, the operational challenges of managing ad inventory is compounded, and of course, companies must decide how to handle ads that are used on television when they appear in places where the pricing information is not required. It would certainly be easier to develop a version of the ad that doesn't require quarterly updates, but it also is easier to traffic fewer total ad units.

CMS Rule Adds to (Doesn't Replace) PhRMA's Pricing Requirements

The Pharmaceutical Research and Manufacturers of America (PhRMA) updated its Guiding Principles on Direct to Consumer Advertisements about Prescription Medicines in October of 2018. The most significant change was the addition of a requirement for television ads to include a destination where people can find pricing information about the prescription drug being advertised. This requirement became operative in April of 2019. All members of PhRMA are obligated to follow the PhRMA guiding principles, and most companies that are not members of PhRMA also abide by the guiding principles. Consequently, almost all television commercials currently airing include a link to a webpage with pricing information.

Adhering to the CMS rule does NOT meet the PhRMA guiding principles. Consequently, most companies will be providing both a link to a page with additional information and the pricing information required by CMS. We'll see how companies execute this, but my expectation is that a single screen at the end of a television commercial will accommodate both pieces of information.

Of course, not all ads are required to include both pieces (or even either piece!) of information.

Non-identical Overlapping Scopes

The new CMS rule applies to all advertised indications of a pharmaceutical product that are reimbursed via Medicare or Medicaid and whose cost is at least $35 per month (or for a typical course of treatment). 42 CFR 403.1200. Note that some drugs have multiple indications, where only some of the indications are reimbursed by CMS. For those products, only the ads that promote an indication reimbursed by CMS are required to include the pricing information; and only if the drug's list price is at least $35 per month (or for a typical course of treatment).

By contrast, the PhRMA guiding principles apply to all ads for prescription medicines regardless of whether the drug is reimbursed by CMS and regardless of the cost. Of course, the guiding principles are only binding on members of PhRMA and any non-member companies that have chosen to abide by the guiding principles.

TL;DR

Some commercials (but we don't know exactly which ones) might start having pricing information in one week. The addition of this information is allegedly going to address the allegedly high price of prescription drugs. The only guaranteed aspect of the recent changes from PhRMA and CMS is that marketing and regulatory operations groups are going to have challenges ensuring ongoing compliance, and the FDA is about to start getting more 2253 filings, including a likely surge of revised television spots in the next few days.

DTC TV Pricing Rule Challenged

SECOND UPDATE: On July 8, 2019, the judge issued an order setting aside the CMS rule. The full opinion is available here.

UPDATE: On July 8, 2019, the judge in this suit is due to provide a ruling on whether the rule will take effect on July 9. The judge might issue a stay on the rule's implementation. For more details, see this report from MM&M.

On June 14, 2019, Amgen, Merck, Lilly, and the Association of National Advertisers filed a complaint challenging the CMS rule requiring TV ads to include drug pricing information.

Here's a link to the original complaint: https://drive.google.com/file/d/1w5I5kvuYIedGaFGOYzl_VtzZEDFGA7vQ/view

If there is no action on this complaint, the rule will go into effect on July 9.

What is streaming TV?

Disclosure: This post discusses some Google products. I sit on the Google Health Advisory Board, and Google has been a client of PhillyCooke Consulting. Nothing in this post has been shown to Google or received the endorsement or approval of anyone at Google. I have not discussed the topic of this post with Google employees.

The Center for Medicare & Medicaid Services finalized a rule requiring some prescription drugs to include pricing information in some direct-to-consumer advertisements. Assuming the rule's implementation is not delayed by court challenges (which have been discussed extensively elsewhere), the rule will be effective July 9, 2019.

I've previously expressed my view about the likelihood of the rule coming into effect and the effectiveness of the rule should it be implemented.

This post, however, is about a different topic. Which ads does the rule apply to?
The scope of the rule is stated at the new 42 CFR 403.1200:

The rule will apply to all prescription drugs or biologics eligible for reimbursement via either Medicare or Medicaid that cost at least $35 per month or for a "typical course of treatment."

Later, at 42 CFR 403.1202, the rule states, "Any advertisement for any prescription drug or biological product on television (including broadcast, cable, streaming, or satellite) must contain a textual statement...."

Nowhere in the rule or the accompanying discussion does it provide any additional clarification about the meaning of television advertisements. Since the draft of the rule was released, some people have raised the question of what exactly "streaming television" is? (See, for example, this discussion published in October.)

This matters, of course, because prescription drug manufacturers will shortly be required to provide drug pricing in certain ads, and to update the ads quarterly with the latest pricing information. CMS made clear in its publication of the draft rule in October, that this requirement was limited. It does not apply to all advertising or even to all direct-to-consumer advertising. Instead, the draft publication stated, 
"We [CMS] considered whether this regulation should apply to advertisements that are in other media forums such as radio, magazines, newspapers, internet websites and other forms of social media, but concluded that the purpose of this regulation is best served by limiting the requirements to only those identified herein."

Clearly, this requirement is intended to be limited, but to know exactly what ads this requirement applies, we need to understand what "broadcast, cable, streaming, and satellite" television are. I know what broadcast, cable, and satellite television are; however, I am unclear on what "streaming television" is.

I researched the Code of Federal Regulations, the United States Code, the Federal Communications Commission website, the Federal Trade Commission website, and of course, the Center for Medicare & Medicaid Services website looking for a definition of "streaming television." None of these sources provide a definition for "streaming television."

The closest I found to an applicable definition is a discussion in an FCC report about competition in the video delivery market, though, even this discussion fails to define "streaming television."
Instead, the FCC report divides video delivery services into three categories: 
  1. Television broadcasters (corresponding to broadcast television in the rule)
  2. Multichannel video programming distributors (MVPD, corresponding to both cable and satellite television in the rule)
  3. Online video distributors (OVD)
It's the last category--OVD--where there's discussion of streaming video services and the newer services that appear to blend features of "traditional" OVD and MVPD providers. Services such as YouTube TV (to which I subscribe), serve traditional broadcast television programming, cable programming, and other content. Nowhere does the FCC refer to any OVD provider (or any other video content provider) as "streaming television." The FCC refers to such providers as "virtual MVPDs." Perhaps, CMS intends "streaming television" to be coextensive with "virtual MVPDs." If so, they could not have been less clear.

Again, the question of what qualifies as "streaming television" matters because prescription drug marketers face a new obligation that clearly isn't intended to apply to all OVD presentations of advertising.  The draft of the rule made it clear that this requirement would not apply to all online platforms, such as Internet websites. Presumably, that means that advertisements on YouTube.com are not required to include drug pricing information. Determining the scope of the application of this new rule will have a significant impact on prescription product advertisers because ads falling within its scope will need to be updated at least quarterly to remain compliant with the CMS rule.

There are, of course, many OVD platforms that might qualify as "streaming TV" but that clearly are not "virtual MVPDs." Netflix, Hulu, individual cable and network apps, sporting leagues apps (such as MLB TV), and services such as Amazon Prime provide content that is often referred to as television. 

Presumably, CMS's published lists of advertisers who are failing to comply with the rule, once available, will provide some clarity, as we learn through its own actions how CMS is interpreting this vague and undefined new category of communication. Until enforcement begins, marketers will largely be making decisions in a vacuum about what ads fall within the scope of this new rule.

"New" Means within the Past Six Months

During the Q&A of a presentation at the AdvaMed Advertising and Promotion of Medical Devices conference (slides here), I was asked why I claimed that the word "new" meant within the past six months. I mentioned that FDA had a post noting this and that FTC also had the same position.

On the train home, I decided to hunt down the sources, and this post is the result so I don't have to duplicate the effort again. I didn't realize that FTC's position on the issue went back to 1967.

I still don't think drug ads will include pricing any time soon


So, I was right!
...

Or maybe I was wrong.
...

Or perhaps the jury's still out.

In May, when President Trump released his blueprint for lowering prescription drug pricing, I wrote a blog post saying that I didn't see how FDA had authority under existing regulations to mandate the inclusion of prices in the direct-to-consumer (DTC) ads. I further claimed that getting such a requirement in place would either require a new regulation, or more likely new legal authority.

Well, as some of you might have heard, yesterday, the Trump administration released a new proposed rule that would require pharmaceutical companies to include the Wholesale Acquisition Cost (WAC) in television ads.

I'll have much more to say about this proposed rule as the conversation continues. And I can't decide which verdict to make on my earlier prediction.

I want to make one point here that hasn't been mentioned in any of the coverage I've seen so far.

Too frequently people talk about prescription drug advertising in a vacuum. The assumption seems to be that people know absolutely nothing about anything and on to this tabula rasa the promotions from pharmaceutical companies are forced, brainwashing people into storming their doctors' offices to demand prescription drugs.

That's not true. Not even close.

People care about their health. They care about the health of their children, their parents, their spouses, and others. When they have a health issue, they start looking for information about ways to treat that issue, ideally to cure it, or at least to help mitigate the symptoms and severity of the condition.

Their search for information will (I hope) include an investigation of whether a prescription treatment is the right option, but it will also include the crap that's sold on disreputable websites. Their search will include supplements, with all of the appropriate concerns.

This is relevant to the debate about drug pricing because one reason prescription drugs cost much more than these other options is that they work. We know they work because the FDA has evaluated the science behind them and believes that there's good reason to believe they work.

The other reason they're more expensive is because most people have some form of prescription drug coverage from their insurance, and insurance companies are willing to pay far more to keep their policy holders healthy than most consumers are willing to pay out of pocket.

Throughout the CMS's proposed rule, there are repeated discussions about how information about the WAC will enable consumers to make rational decisions about treatment options. The assumption seems to be that consumers are limited solely to trying to decide between prescription drug A and prescription drug B and that knowing the WAC will somehow enable them to make a better decision between the two. All by itself, this is a deeply suspect proposition.

But the more important point I want to make now is that people aren't trying to decide between prescription drug A and B. They're also considering pseudoscience crap C and possibly dangerous supplement D and over-the-counter treatment E and loads of other options as well.

Currently, people don't know how much prescription drugs cost, and maybe that's a good thing because it keeps people from comparing that $84,000 prescription drug to the $75 pseudoscience product. Acting as if the price is the sole, or even the primary, factor that consumers should use to evaluate treatment options ignores that most of the evaluation doesn't occur purely among different prescription treatments, and it also rarely involves a qualified health care professional.

It's most often a person, maybe a family, alone, or talking with their friends trying to figure out what's wrong and how they can fix it.

The response to including pricing in prescription drug ads could be, as I've said repeatedly, that people are scared away from prescription drugs that would be relatively affordable for the individual.

It also could be that the crap starts getting more expensive. After all, if people grow accustomed to seeing health treatments advertised with a list price of $100,000 or more, then they won't necessarily notice that the item being advertised is a dangerous supplement or pure pseudoscience.

I've noticed over the past few years that more and more ads for supplements have started mimicking prescription drug advertising. They make their logos look like prescription drug logos. They include a risk statement in their ads. To someone who isn't trained in knowing the difference, you could be forgiven for thinking there's no difference between these products and prescription treatments.

Is it really a stretch to think that requiring prescription treatments to include prices will result in those pseudoscience products doing the same, or to worry that the prices they start seeing as their comparator is the now revealed price of the prescription treatment?


On Bending the Cost Curve & MACRA's Flaws

I'm taking advantage of my law school education to write about issues that are related to my work, but sometimes a bit afield of the strictly limited area of FDA regulation of advertising and promotion. Whenever I have something that I think might interest the readers of this blog, I'll post the piece to my Scribd.com account, a link to which is always available in the right rail under the label of "Long-form writings."

The first such piece is about the Medicare Access and CHIP Reauthorization Act (MACRA) and why MACRA, which was colloquially known as the "permanent doc fix," is going to be a huge issue in the 2020 election. In fact, some time next year, I expect the very serious flaws in this legislation to explode in the public consciousness and to become the next "crisis" in healthcare financing.

If you'd like to get ahead of the topic to prepare yourself, take a look at the linked piece. I'd be happy to continue the discussion of this topic in the comments on this post.


People Care about Their Cost for Medicine, Not Pricing

The Kaiser Family Foundation released a poll showing that most Americans of all political persuasions support requiring prices in prescription drug ads, as supported by President Trump.

Ed Silverman of Stat News wrote a story about this poll, including a few comments from me. Later, I mentioned on Twitter that there was at least one important point I didn't tell Ed.

The poll didn't ask people what price to include (WAC, AMP, NADAC, FUL, AAC, SWP, etc.), and that's not surprising, since most people don't realize that there are so many different prices for prescription drugs.

That's an important point. There are tons of prices for prescription drugs, and at the end of the day, none of them correlates with what consumers actually care about.

Consumers care about how much THEY will pay for their prescriptions, but there's no way to determine that for all consumers, so any price that is presented is AT BEST deeply misleading.

What actually determines the price paid by the consumer at the pharmacy counter is a combination of: 1) what insurance (if any) they have, 2) which pharmacy they're using, 3) where they are in terms of their personal/family deductible for the year (or progress toward the prescription drug donut hole for those with Part D coverage), and 4) whether the manufacturer has any sort of copay or patient assistance program.

The WAC for Drug A might be $100, but if my copay is $4, then that's what matters to me. And if Drug B has a WAC of $50, but my copay is $25 for Drug B, then I'm not going to prefer Drug B despite the lower WAC.

I didn't conduct the Kaiser survey, and it would be difficult to ask the right questions to get at this issue, but if the pollsters were to include questions about things such as which price matters to a consumer, or what consumers mean when they say they want the "price" included in the drug ads, I suspect that what they'll find is that when pollsters ask, "Do you want pricing in drug ads?" what consumers hear is, "Do you want the ad to include how much you'll have to pay out of pocket for the drug?"

And unfortunately (or fortunately), there's no way to do that. I don't mean it's very hard to do that. I mean it's impossible to do that. Because the factors (as discussed above) are deeply personal, there's no way a manufacturer can include that information in their ads.

As Peter Pitts noted in a recent column, one factor driving the recent emphasis on drug pricing is the transition to high-deductible plans. As Americans are being asked to shoulder more of the costs out of pocket, they're becoming more aware of the high cost of some prescription drugs.

A few years ago, I learned just how much variety there is among pharmacies even for generic drugs, when I was buying medicine for a family member who did not have health insurance. I called several different pharmacies because the price was solely coming out of my pocket, and I was shocked to learn that the price varied from more than $150 to $10 for a 30-day supply. Needless to say, I chose the pharmacy with the $10 prescription.

All of this is to say that in addition to the issues I've previously discussed on how unlikely it is for FDA to mandate the inclusion of drug pricing in ads, consumers really don't understand what is being proposed, and as a consequence, they're unlikely to be happy with anything that results.

As I said to Ed during our phone call discussing this in comments that wound up on the cutting room floor, this is a situation where consumers are angry at pharmaceutical companies and I suspect that a significant part of the bipartisan support for including pricing in ads is along the lines of, "if pharma companies are against it, then it must be a good idea."