DTC TV Pricing Rule Challenged

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.