Medicare and Medicaid Programs; Regulation To Require Drug Pricing Transparency, 20732-20758 [2019-09655]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 84, Number 91 (Friday, May 10, 2019)]
[Rules and Regulations]
[Pages 20732-20758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09655]



[[Page 20731]]

Vol. 84

Friday,

No. 91

May 10, 2019

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 403





Medicare and Medicaid Programs; Regulation To Require Drug Pricing 
Transparency; Final Rule

Federal Register / Vol. 84, No. 91 / Friday, May 10, 2019 / Rules and 
Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 403

[CMS-4187-F]
RIN 0938-AT87


Medicare and Medicaid Programs; Regulation To Require Drug 
Pricing Transparency

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule revises the Federal Health Insurance Programs 
for the Aged and Disabled by amending regulations for the Medicare 
Parts A, B, C and D programs, as well as the Medicaid program, to 
require direct-to-consumer (DTC) television advertisements of 
prescription drugs and biological products for which payment is 
available through or under Medicare or Medicaid to include the 
Wholesale Acquisition Cost (WAC or list price) of that drug or 
biological product. This rule is intended to improve the efficient 
administration of the Medicare and Medicaid programs by ensuring that 
beneficiaries are provided with relevant information about the costs of 
prescription drugs and biological products so they can make informed 
decisions that minimize their out-of-pocket (OOP) costs and 
expenditures borne by Medicare and Medicaid, both of which are 
significant problems.

DATES: This rule is effective July 9, 2019.

FOR FURTHER INFORMATION CONTACT: Cheri Rice, (410) 786-6499.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Purpose and Statutory Basis
    B. Summary of the Rule
    C. Problems That This Rule Seeks To Address
    D. How the Rule Addresses These Problems-Transparency in Drug 
Pricing Promotes Competition and Lowers Prices by Informing 
Beneficiaries
II. Summary of, Analysis of, and Response to Public Comments
    A. Secretary's Statutory Authority To Require List Prices in DTC 
Advertising for Manufacturers Whose Drugs Are Payable Under Titles 
XVIII or XIX of the Social Security Act
    B. General Comments on Direct-to-Consumer Advertising
    C. Use of Wholesale Acquisition Cost as List Price
    D. First Amendment Considerations
    E. Requirements in DTC Advertising Other Than WAC
    F. Other Alternatives
    G. Enforcement
III. Collection of Information Requirements
    A. Wage Data
    B. Information Collection Requirements Regarding Pricing 
Information (Sec.  403.1202)
IV. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Anticipated Effects
    D. Alternatives Considered
    E. Accounting Statement

I. Background

A. Purpose and Statutory Basis

    Delivering better care at more transparent, lower prices is one way 
the Trump Administration is putting American patients first. The May 
2018 Trump Administration blueprint to lower drug prices described a 
new, more transparent drug pricing system that would lower high 
prescription drug prices and bring down out-of-pocket (OOP) costs. The 
blueprint described four strategies: Boosting competition, enhancing 
negotiation, creating incentives for lower list prices, and reducing 
OOP spending.
    The blueprint called for HHS to consider requiring the inclusion of 
list prices in direct-to-consumer (DTC) advertising. This final rule 
will improve the efficient administration of the Medicare and Medicaid 
programs by improving drug price transparency and informing consumer 
decision-making, both of which can increase price competition and slow 
the growth of federal spending on prescription drugs.

B. Summary of the Rule

    In the October 18, 2018 Federal Register (83 FR 52789), we 
published a proposed rule titled ``Medicare and Medicaid Programs; 
Regulation to Require Drug Pricing Transparency'' (hereinafter referred 
to as the ``October 2018 proposed rule''). After consideration of the 
public comments received, we are finalizing this rule largely as 
proposed, with one modification to proposed Sec.  403.1204(b) in 
response to comments, and other minor technical changes to improve 
clarity.
    This final rule requires DTC television advertisements for 
prescription drugs and biological products for which reimbursement is 
available, directly or indirectly, through or under Medicare or 
Medicaid to include the list price of that product. This final rule 
amends subchapter A, part 403, by adding a new subpart L.
    New Sec.  403.1202 requires that advertisements for certain 
prescription drugs or biological products on television (including 
broadcast, cable, streaming, and satellite) contain a statement or 
statements indicating the Wholesale Acquisition Cost (referred to as 
WAC or the list price) for a typical 30-day regimen or for a typical 
course of treatment, whichever is most appropriate, as determined on 
the first day of the quarter during which the advertisement is being 
aired or otherwise broadcast, as follows: ``The list price for a [30-
day supply of ] [typical course of treatment with] [name of 
prescription drug or biological product] is [insert list price]. If you 
have health insurance that covers drugs, your cost may be different.''
    New Sec.  403.1200 specifies that this requirement applies to any 
advertisement for a prescription drugs or biological product 
distributed in the United States, for which payment is available, 
directly or indirectly, under titles XVIII or XIX of the Social 
Security Act, except for a prescription drugs or biological product 
that has a list price, as defined herein, of less than $35 per month 
for a 30-day supply or typical course of treatment. The list price 
stated in the advertisement must be current, as determined on the first 
day of the quarter during which the advertisement is being aired or 
otherwise broadcast. When the typical course of treatment varies based 
on the indication for which the drug or biological product is 
prescribed, the list price should represent the typical course of 
treatment associated with the primary indication addressed in the 
advertisement. To the extent permissible under current laws, 
manufacturers are permitted to include an up-to-date list price of a 
competitor's product, so long as they do so in a truthful, non-
misleading way.
    New Sec.  403.1203 specifies that the required list price 
disclosure set forth in Sec.  403.1202 must be conveyed in a legible 
textual statement at the end of the advertisement, meaning that it is 
placed appropriately and is presented against a contrasting background 
for sufficient duration and in a size and style of font that allows the 
information to be read easily.
    Finally, new Sec.  403.1204 specifies that the Secretary will 
maintain a public list that would include the prescription drugs and 
biological products advertised in violation of these requirements. We 
anticipate that the primary enforcement mechanism will be the threat of 
private actions under the Lanham Act sec. 43(a), 15 U.S.C. 1125(a), for 
unfair competition in the form of false or misleading advertising.

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Accordingly, we proposed at Sec.  403.1204(b) that this rule preempt 
any state-law-based claim that depends in whole or in part on any 
pricing statement required by this rule. No state or political 
subdivision of any state may establish or continue in effect any 
requirement that depends in whole or in part on any pricing statement 
required by these regulations.

C. Problems That This Rule Seeks To Address

1. Rising Prices and Costs and Their Effect on the Medicare and 
Medicaid Programs and Their Beneficiaries
(a) Rise in Prices and Costs
    The cost of drugs and biological products over the past decade has 
increased dramatically, and prices are projected to continue to rise 
faster than overall health spending, thereby increasing this sector's 
share of health care spending. The HHS Office of the Assistant 
Secretary for Planning and Evaluation estimates that prescription drug 
spending in the United States was about $457 billion in 2015, or 16.7 
percent of overall personal health care services. Of that $457 billion, 
$328 billion (71.9 percent) was for retail drugs and $128 billion (28.1 
percent) was for non-retail drugs. Factors underlying the rise in 
prescription drug spending from 2010 to 2014 can be roughly allocated 
as follows: 10 percent of that rise was due to population growth; 30 
percent to an increase in prescriptions per person; 30 percent to 
overall, economy-wide inflation; and 30 percent to either changes in 
the composition of drugs prescribed toward higher price products or 
price increases for drugs that together drove average price increases 
in excess of general inflation.\1\
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    \1\ U.S. Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation, ASPE Issue Brief: 
Observations on Trends in Prescription Drug Spending, (2016). 
https://aspe.hhs.gov/system/files/pdf/187586/Drugspending.pdf.
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    This final rule is designed to address rising list prices by 
introducing price transparency that will help improve the efficiency of 
Medicare and Medicaid programs by reducing wasteful and abusive 
increases in drug and biological product list prices--spiraling drug 
costs that are then passed on to federal healthcare program 
beneficiaries and American taxpayers more broadly. First, it will 
provide manufacturers with an incentive to reduce their list prices by 
exposing overly costly drugs to public scrutiny. Second, it will 
provide some consumers with more information to better position them as 
active and well-informed participants in their health care decision-
making. Consumers make a series of critical health care decisions 
related to their treatment with prescription drugs or biological 
products, and the list price of those drugs may inform those decisions. 
Even where the consumer may be insured, and therefore may be paying 
substantially less than the list price, the coinsurance borne by some 
consumers will increase as the WAC increases.
(b) Impact of Rise in Prices and Costs on Part B and Part D 
Beneficiaries
    As discussed in the proposed rule, CMS is the single largest payor 
of prescription drugs in the nation. In 2017, CMS and its beneficiaries 
spent $224.6 billion ($166.2 billion net of rebates) on drug benefits 
provided under Part B ($30.6 billion),\2\ Part D ($129.7 billion gross 
spend, $100.7 billion net of rebates),\3\ and Medicaid ($64.0 billion 
gross spend, $34.9 billion net of rebates including federal and state 
funds).\4\ An additional sum was spent on drugs furnished by hospitals 
under Part A's inpatient prospective payment system, but the precise 
amount is difficult to isolate because hospitals receive a single 
payment for all non-physician services provided during an inpatient 
stay (including drugs). In 2016, CMS and its beneficiaries spent more 
than $238 billion on prescription drugs, approximately 53 percent of 
the $448.2 billion spent on retail and non-retail prescription drugs in 
the United States that year. Each year overall expenditures on drugs by 
both the Medicare and Medicaid programs and their beneficiaries have 
increased at rates greater than inflation both in the aggregate and on 
a per beneficiary basis.\5\ These dramatically increasing costs are a 
threat to the sustainability of the programs and harm CMS beneficiaries 
every day.
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    \2\ ASPE Calculations from Part B Standard Analytic Files.
    \3\ 2018 Annual Report of the Board of Trustees' of the Federal 
Hospital and Insurance and Federal Supplementary Medical Insurance 
Trust Funds.
    \4\ MACPAC. Fact Sheet: Medicaid Drug Spending Trends. Feb 2019. 
https://www.macpac.gov/wp-content/uploads/2019/02/Medicaid-Drug-Spending-Trends.pdf.
    \5\ According to the 2018 Annual Report of the Board of 
Trustees' of the Federal Hospital and Insurance and Federal 
Supplementary Medical Insurance Trust Funds, over the past 10 years, 
Part D benefit payments have increased by an annual rate of 7.4 
percent in aggregate and by 3.8 percent on a per enrollee basis. 
These results reflect the rapid growth in enrollment, together with 
multiple prescription drug cost and utilization trends that have 
varying effects on underlying costs. For example, though there has 
been a substantial increase in the proportion of prescriptions 
filled with low-cost generic drugs there has also been a significant 
increase in spending on high-cost specialty drugs (including those 
most frequently advertised via televised DTC advertisements), 
leading to overall increased costs. In other words, the per 
beneficiary cost of drugs through Part D has increased nearly 40% 
over the past decade, while the consumer price index has increased 
only 19% during this same period. Over the period 2013-2016, 
Medicare Parts D and B, and Medicaid expenditures on a per 
beneficiary basis increased by 22%, 32%, and 42% respectively. Drug 
price inflation accounts for some of this growth. Between 2006 and 
2015, Part D brand drug prices rose by an average 66% cumulatively.
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(c) Impact on States Under Medicaid--Rising Prices and Costs Adversely 
Affects Medicaid and Benefits Offered to Beneficiaries
    The increasing cost of drugs and biological products are a major 
concern for state Medicaid agencies. The Medicaid and CHIP Payment and 
Access Commission (MACPAC) states that the ``[h]igh rates of spending 
growth for prescription drugs have been of great concern to state and 
federal Medicaid officials. In 2014, Medicaid prescription drug 
spending experienced its highest rate of growth in almost three 
decades. And although spending growth slowed in 2015 and 2016, over the 
next 10 years prescription drugs could see the fastest average annual 
spending growth of any major health care good or service due to growth 
in high-cost specialty drugs.'' \6\ States are having to balance 
alternatives to control drug costs,\7\ and increases in drug spending 
that threaten the provision of other health services are causing other 
states to address drug costs to keep their programs 
sustainable.8 9 10
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    \6\ MACPAC. Prescription Drugs. https://www.macpac.gov/topics/prescription-drugs/.
    \7\ Young K and Garfield R. Kaiser Family Foundation Issue 
Brief: Snapshots of Recent State Initiatives in Medicaid 
Prescription Drug Cost Control. Feb 2018, https://files.kff.org/attachment/Issue-Brief-Snapshots-of-Recent-State-Initiatives-in-Medicaid-Prescription-Drug-Cost-Control.
    \8\ Reck J. As Drug Prices Rise, Oklahoma's Medicaid Agency 
Advances Alternative Payment Models. National Academy for State 
Health Policy. 2018 Dec 17. https://nashp.org/as-drug-prices-rise-oklahomas-medicaid-agency-advances-alternative-payment-models/.
    \9\ Rosenberg T. Treat Medicines Like Netflix Treats Shows. NYT. 
https://www.nytimes.com/2019/03/05/opinion/can-netflix-show-americans-how-to-cut-the-cost-of-drugs.html.
    \10\ Gee R. Health Affairs Blog. Louisiana's Journey Toward 
Eliminating Hepatitis C. 2019 April 1. https://www.healthaffairs.org/do/10.1377/hblog20190327.603623/full/.
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2. Direct-to-Consumer Advertising
    Prescription drugs, by definition, cannot be accessed directly by 
the consumer; they must be prescribed by a licensed health care 
practitioner. We know, however, that consumers are responsible for 
critical choices related to their treatment with prescription drugs. 
For example, consumers decide whether

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to make the initial appointment with a physician; whether to ask the 
physician about a particular drug or biological product; whether to 
fill a prescription; whether to take the drug; and whether to continue 
taking it in adherence to the prescribed regimen. Drug manufacturers, 
therefore, spend billions of dollars annually promoting their 
prescription drugs and biological products directly to consumers 
through television advertisements and other media.
    In 2017, over $5.5 billion was spent on prescription drug 
advertising, including nearly $4.2 billion on television 
advertising.\11\ DTC advertising appears to directly affect drug 
utilization.\12\ DTC advertising may increase disease awareness and 
facilitate more informed discussions between consumers and their health 
care providers. But it can also result in increased utilization through 
patients requesting costly drugs and biological products seen on 
television. This could cause problematic increases in government 
spending if less costly alternatives are available, or would be 
available through market pressures resulting from greater price 
transparency.
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    \11\ Kantar Media Advertising Intelligence--2013 to 2017 
Prescription Medications Ad Spend Data.
    \12\ Dave D and Saffer H. Impact of Direct-to-Consumer 
Advertising on Pharmaceutical Prices and Demand, Southern Economic 
Journal. 79 (1), 97-126; Datti B and Carter MW. The Effect of 
Direct-to-Consumer Advertising on Prescription Drug Use by Older 
Adults, Drugs Aging. 2006;23(1):71-81.
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(a) Direct-to-Consumer Advertising Promotes Interaction With 
Physicians, but Also Is a Factor in Increasing Demand for Higher Cost 
Drugs
    Studies show that consumers exposed to drug advertisements can 
exert sufficient pressure on their physicians to prescribe the 
advertised product.\13\ In one recent survey, 11 percent said they were 
prescribed a specific drug after asking a doctor about it as a result 
of seeing or hearing an advertisement.\14\ Another study concludes that 
there is evidence that DTC advertising can lead to more physician 
visits, diagnoses, and prescriptions for advertised conditions, though 
there is little evidence showing that the additional care is medically 
necessary.\15\ The same study found that DTC advertising is associated 
with higher prescribing volume of advertised drugs, increased patient 
demand, and a shift in prescribing behavior. Other studies have shown 
that DTC advertising increases both the utilization of pharmaceuticals 
\16\ and costs of pharmaceuticals.\17\
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    \13\ Mintzes B, Barer ML, Kravitz RL, et al. Influence of direct 
to consumer pharmaceutical advertising and patients' requests on 
prescribing decisions: Two site cross sectional survey, BMJ. 2002 
Feb 2;324(7332):278-9.
    \14\ Kirzinger A, Wu B, and Brodie M. Kaiser Health Tracking 
Poll--June 2018: Campaigns, Pre-Existing Conditions, and 
Prescription Drug Ads. Jun 27, 2018. https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-june-2018-campaigns-pre-existing-conditions-prescription-drug-ads/.
    \15\ Mintzes B. Advertising of Prescription-Only Medicines to 
the Public: Does Evidence of Benefit Counterbalance Harm? Annu Rev 
Public Health. 2012 Apr;33:259-77.
    \16\ Frosch DL, Grande D, Tarn DM, Kravitz RL. A decade of 
controversy: Balancing policy with evidence in the regulation of 
prescription drug advertising. Am J Public Health. 2010;100(1):24-
32.
    \17\ Law MR, Soumerai SB, Adams AS, Majumdar SR. Costs and 
consequences of direct-to-consumer advertising for clopidogrel in 
Medicaid. Arch Intern Med. 2009 Nov 23;169(21):1969-74.
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(b) Physicians Lack Access to Published WAC Data or a Patient's Out-of-
Pocket Costs
    DTC advertising, which has been shown to increase prescribing and 
demand for high-cost drugs, currently provides no context for 
physicians and other prescribers to assess a drug's cost or compare the 
costs of different treatments. Although the WAC for most drugs payable 
under Medicare Part B is reported to CMS and the WAC for most other 
drugs is reported to commercial compendia for widespread use by 
pharmacies and payors, prescribers generally lack access to this 
information. In addition, prescribers generally lack information about 
a drug's formulary placement or the cost sharing that patients would 
pay. For this reason, in our recent proposed rule titled, ``Modernizing 
Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-
Pocket Expenses,'' 83 FR 62152 (November 30, 2018), we proposed to 
require that Part D plan sponsors implement an electronic real-time 
benefit tool (RTBT) capable of integrating with at least one 
prescriber's e-prescribing and electronic medical record systems, to 
make beneficiary-specific drug coverage and cost information visible to 
prescribers who wish to consider such information in their prescribing 
decisions. This could provide an important supplement to any pricing 
information that is provided to patients and allow both the patient and 
provider to be informed when having discussions about the best overall 
therapy for the patient.
3. Direct-to-Consumer Advertising That Lacks Meaningful Pricing 
Information Is Potentially Misleading
    As we stated in the October 2018 proposed rule, price transparency 
has been lacking in the case of prescription drugs or biological 
products, where consumers often need to make decisions without 
information about a product's price. Price transparency is a necessary 
element of an efficient market that allows consumers to make informed 
decisions when presented with relevant information. However, for 
consumers of prescription drugs or biological products, including those 
whose drugs are covered through Medicare or Medicaid, both the list 
price and actual price to the consumer remain hard to find. Third-party 
payment, a dominant feature of health care markets, is not a prominent 
feature of other markets of goods and services and causes distortions, 
such as an absence of meaningful prices and the information and 
incentives those prices provide. Because of the confusion and 
distortions in the existing prescription drug market, it is our view 
that the absence of the WAC would make a DTC television advertisement 
potentially misleading because consumers appear to dramatically 
underestimate their OOP costs for expensive drugs, but once they learn 
the WAC, they become far better able to approximate their OOP 
costs.\18\
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    \18\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``JAMA 2019 Study'').
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(a) Studies Suggest That Patients Are Ill-Informed About Their Out-of-
Pocket Costs and Do Not Use Available Online Services
    As we explain in further detail in section II.C.1 below, although 
the WAC is highly relevant to patients' OOP costs, it may not reflect 
what a patient actually pays. Studies show that many beneficiaries do 
not appropriately use existing online tools, such as the Medicare Part 
D Plan Finder, to find the most cost effective product 19 20 
or to determine their OOP costs. While we continue to believe that the 
Medicare Part D Plan Finder is very helpful and we hope more patients 
use it, we think the DTC advertisement disclosure provides additional 
information that is very useful to patients to help them understand 
drug pricing. In this context, the availability of readily accessible 
pricing data--such as what would be conveyed at the time a DTC

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advertisement is aired--becomes more important.
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    \19\ Heiss F, Leive A, McFadden D, and Winter J. Plan selection 
in Medicare Part D: evidence from administrative data. J Health 
Econ. 2013 Dec;32(6):1325-44.
    \20\ Zhou C and Zhang Y. The vast majority of Medicare Part D 
beneficiaries still don't choose the cheapest plans that meet their 
medication needs. Health Aff. 2012 Oct;31(10):2259-65.
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(b) Studies Suggest That Patients Want to Know the List Price of Drugs
    Despite the fact that a patient's OOP costs will likely differ from 
the list price, studies indicate that knowing the list price of a drug 
is important to consumers. A recent tracking poll by the Kaiser Family 
Foundation found that 88 percent of Americans support requiring drug 
manufacturers to include their list prices in DTC advertisements.\21\ 
The same survey found that 24 percent of Americans find it difficult to 
afford their drugs, and 10 percent say that it is very difficult to 
afford their drugs. Of those that spend more than $100 per month on 
drugs, 58 percent find it difficult to afford their drugs. The poll 
showed broad support for policies intended to reduce prescription drug 
costs. The price disclosure requirements that we are finalizing in this 
rule will provide consumers with this important information needed to 
aid them in an effort to find lower cost alternatives, and improve the 
efficiency of Medicare and Medicaid.
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    \21\ Kirzinger A, Lopes L, We B, and Brodie M. KFF Health 
Tracking Poll--February 2019: Prescription Drugs. Kaiser Family 
Foundation. 2019 March 01. https://www.kff.org/8c7d090/.
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(c) Studies Suggest That Patients Who Know the List Price of a Drug Are 
Better Informed About Their Out-of-Pocket Costs Than Those Who Are Not 
Informed of the List Price
    A recent study strongly suggests that when told the price of 
pharmaceutical products, patients are better able to approximate their 
OOP costs.\22\ In that study, published after the proposed rule was 
issued, researchers asked subjects to estimate their monthly OOP costs 
for a drug with a hypothetical price of $15,500 per month. When 
subjects were provided no information about price, they responded that 
their OOP costs would be, on average, $78 per month. This finding tends 
to support our belief that patients seem to underestimate the true cost 
of drugs advertised on television. However, when subjects were told the 
price, they more accurately determined their OOP costs at $2,787 or 
about 18 percent of the hypothetical price. The informed estimates were 
far closer to what one would expect to see paid at the pharmacy counter 
under most plans than the uninformed assessment of $78. This finding 
provides evidence that patients may adjust their expectations of cost 
if they received pricing information.
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    \22\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'')
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D. How the Rule Addresses These Problems-Transparency in Drug Pricing 
Promotes Competition and Lowers Prices by Informing Beneficiaries

    Both Titles XVIII and XIX of the Social Security Act reflect the 
importance of administering the Medicare and Medicaid programs in a 
manner that minimizes unreasonable expenditures. See, e.g., Sections 
1842(b)(8) and (9), 1860D-4(c)(3), 1860D-4(c)(5)(H), 1866(j)(2)(A), 
1893(g), 1902(a)(64), 1902(a)(65), 1936(b)(2). In order to enable 
consumers to make good health care choices, which will in turn improve 
the efficiency of the Medicare and Medicaid programs, it is critical 
that they understand the costs associated with various medications. 
This is especially important where consumers have cost sharing 
obligations that may be significant. As discussed above, DTC television 
advertisements that do not provide pricing information may contribute 
to rising drug prices. Consumers of pharmaceuticals are currently 
missing information that consumers of other products can more readily 
access, namely the list price of the product, which acts as a point of 
comparison when judging the reasonableness of prices offered for 
potential substitute products. In an age where price information is 
ubiquitous, the prices of pharmaceuticals remain shrouded and limited 
to those who subscribe to expensive drug price reporting services. 
Consumers may be able to obtain some pricing information by going 
online to the websites of larger chain pharmacies. However, there are 
several reasons consumers are not likely to do this. First, while 
consumers make many critical decisions that bring about the ultimate 
writing of the prescription--making the appointment, asking the doctor 
about particular drugs, etc.--the physician, rather than the patient, 
ultimately controls the writing of the prescription. Second, meaningful 
price shopping is further hindered because the average consumer 
receives no basic price information. Arming a beneficiary with basic 
price information will provide him or her with an anchor price or a 
reference comparison to be used when making decisions about therapeutic 
options. Triggering conversations about a particular drug or biological 
product and its substitutes may lead to conversations not only about 
price, but also efficacy and side effects, which in turn may cause both 
the consumer and the prescriber to consider the cost of various 
alternatives (after taking into account the safety, efficacy, and 
advisability of each treatment for the particular patient). Ultimately, 
providing consumers with basic price information may result in the 
selection of lesser cost alternatives, all else being equal relative to 
the patient's care.
    To this end, this rule requires price transparency for drugs that 
are advertised on television. Price transparency can be an effective 
and appropriate way to influence behavior and improve market 
efficiency. Price transparency has the potential to influence patient 
behavior, as well as address our increasing health care costs. 
Additionally, price transparency has been identified as a low-risk 
intervention with the potential to reduce health care costs without 
directly regulating health care reimbursement systems.\23\
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    \23\ Sinaiko AD and Rosenthal MB. Increased price transparency 
in health care--challenges and potential effects. N Engl J Med. 2011 
Mar 10;364(10):891-4.
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II. Summary of, Analysis of, and Response to Public Comments

    We received 147 comments in response to the October 18, 2018 
proposed rule (83 FR 52789). Stakeholders offered comments that 
addressed both high-level issues related to DTC advertising as well as 
our specific proposals and requests for comments. We extend our deep 
appreciation to the public for its interest in lower drug prices and 
increased price transparency, and the many comments that were made in 
response to our proposed policies. In some instances, the public 
comments offered were outside the scope of the proposed rule and will 
not be addressed in this final rule.

A. Secretary's Statutory Authority To Require List Prices in Direct-to-
Consumer Advertising for Manufacturers Whose Drugs Are Payable Under 
Titles XVIII or XIX of the Social Security Act

    We proposed to use our authority under sections 1102 and 1871 of 
the Social Security Act to require manufacturers to disclose their list 
prices in DTC television advertisements. We received comments on our 
use of these authorities. These comments, and our responses, follow.
    Comment: Many commenters stated that the proposal is beyond the 
authority of CMS to promulgate these regulations under a reasonable 
interpretation of sections 1102 and 1871 of the Social Security Act, 
specifically

[[Page 20736]]

noting that neither statutory provision says anything about 
prescription drugs or biological products, their prices, or 
advertisements about them. A commenter stated that while CMS 
acknowledges that it is bound both by the purposes and means specified 
by Congress, the agency improperly tries to mix and match various ends 
and means from disparate Social Security Act provisions to essentially 
create a new statute that this rule would ``implement.'' Commenters 
stated that CMS's interpretation is unreasonable because sections 1102 
and 1871 of the Social Security Act are general housekeeping statutes, 
not broad delegations of authority.
    Response: We disagree with these comments. As discussed in the 
proposed rule, the Secretary has the authority to promulgate 
regulations as necessary for the efficient administration of Medicare 
and Medicaid. Although we acknowledge that neither section 1102 nor 
section 1871 of the Social Security Act specifically references 
prescription drugs or biological products, their prices, or 
advertisements, we nevertheless believe that requiring manufacturers to 
include list prices in DTC television advertisements is supported by 
the plain text of these statutes. Section 1102 requires the Secretary 
to ``make and publish such rules and regulations, not inconsistent with 
this Act, as may be necessary to the efficient administration of the 
functions with which [he or she] is charged'' under the Social Security 
Act. Similarly, section 1871 requires the Secretary to ``prescribe such 
regulations as may be necessary to carry out the administration of the 
insurance programs under [Title XVIII].'' By their terms, then, these 
provisions authorize regulations that the Secretary determines are 
necessary to administer these programs. These statutes do not impose a 
limit on the means, other than to say, in the case of section 1102, 
that they not be inconsistent with the Social Security Act.
    We also disagree with the commenters who believe that our 
interpretation of sections 1102 and 1871 is unreasonable. These 
provisions confer broad discretion upon the Secretary to determine the 
regulations that are necessary to the efficient administration of the 
functions with which he or she is charged under the Social Security Act 
(in the case of section 1102), and the administration of Medicare (in 
the case of section 1871). Thus, the text of these statutes clearly 
indicates that they are intended to permit requirements that are 
necessary to achieve those aims. Medicare and Medicaid beneficiaries 
have access to significant amounts of information about their OOP drug 
costs, such as the Medicare Part D Plan Finder, which permits Medicare 
Part D enrollees to look up information about their expected costs. 
However, beneficiaries do not use Plan Finder to the extent necessary 
to promote price competition. We are imposing this disclosure 
requirement to enable beneficiaries to make more informed decisions, as 
this will promote transparency, efficiency, and the responsible use of 
federal funds, in particular the Medicare trust funds.
    We further disagree with commenters who contended that we are 
``mixing and matching'' ends and means to form a statutory basis for 
this rule. In the proposed rule, we stated that the rule uses means 
that Congress has generally endorsed--disclosures about drug prices--to 
advance an end that Congress endorsed--minimizing unreasonable 
expenditures--and thus there is a clear nexus between HHS's proposed 
actions and the Act. This statement was not intended to indicate that 
we believe we can piece together statutory authority from various 
sources; rather, it was intended to show only that the requirements we 
proposed are within the realm of what is necessary for the efficient 
administration of Medicare and Medicaid because they are consistent 
with other means Congress has authorized elsewhere in the Social 
Security Act.
    We disagree that sections 1102 and 1871 are housekeeping statutes. 
A true housekeeping statute, such as 5 U.S.C. 301, relates to internal 
agency governance. In contrast, sections 1102 and 1871 provide broad 
rulemaking authority to carry out Medicare and Medicaid and have been 
cited as authority for a multitude of regulations to implement these 
programs. See Thorpe v. Housing Authority of City of Durham, 393 U.S. 
268, 277 n.28 (1969) (``Thorpe'').
    Comment: Commenters stated that the cases cited in the proposed 
rule did not support the agency's interpretation of these statutory 
authorities and that because the cases cited predate Chevron U.S.A., 
Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), they 
are the not the correct standard under which to assess the agency's 
interpretation of its statutory authorities. These commenters state 
that the agency's interpretation fails under the two-part Chevron test.
    Response: We disagree with these comments. The cases we cited stand 
for the proposition that a grant of broad rulemaking authority permits 
regulations that are reasonably related to the purposes of the programs 
for which rulemaking is authorized, and that the Secretary has 
discretion to determine which rules are necessary. See Mourning v. 
Family Publ'ns Servs., Inc., 411 U.S. 356, 369 (1973) (``Mourning''); 
Thorpe, 393 U.S. at 277 n.28; Sid Peterson Mem'l Hosp. v. Thompson, 274 
F.3d 301, 313 (5th Cir. 2001); Cottage Health Sys. v. Sebelius, 631 F. 
Supp. 2d 80, 92 (D.D.C. 2009). Even the cases cited in which 
regulations were struck down support CMS's interpretation. For example, 
in Food & Drug Administration v. Brown & Williamson Tobacco 
Corporation, 519 U.S. 120 (2000), the Supreme Court instructed that an 
agency's power to regulate must be grounded in a valid grant of 
authority from Congress, viewed in context of the overall statutory 
scheme. Viewing the Medicare and Medicaid schemes as a whole, nothing 
prohibits the requirements we are finalizing in this rule. Instead, 
they are consistent with the overall statutory scheme under the Social 
Security Act given the clear nexus between this requirement and 
Congress's recognition throughout the Social Security Act of the 
importance of administering the Medicare and Medicaid programs in a 
manner that minimizes unreasonable expenditures. Similarly, Colorado 
Indian River Tribes v. National Indian Gaming Commission, 466 F.3d 134 
(D.C. Cir. 2006), states that agencies are bound by Congress's ultimate 
purpose and the selected means, but in that case--similar to Brown & 
Williamson--the regulations at issue, though based on a general grant 
of rulemaking authority, were invalidated because they would have been 
inconsistent with the overall statutory scheme that called for class 
III gaming to be subject to state-tribal compacts rather than agency 
regulations.
    We disagree that the cases cited in the proposed rule represent the 
incorrect standard under which to assess our interpretation of sections 
1102 and 1871 or that this rule fails the two-part Chevron test. With 
respect to questions of statutory interpretation, ``considerable weight 
should be accorded to an executive department's construction of a 
statutory scheme it is entrusted to administer.'' Chevron, 467 U.S. at 
844. Chevron sets forth a deferential two-step process to review an 
agency's construction of a statute which it administers. 467 U.S. at 
842. First, if Congress has unambiguously spoken to the issue in 
question, the court must give effect to Congress's intent. Id. at 843. 
Second, if the statute

[[Page 20737]]

is silent or ambiguous, the court should accord deference to the 
agency's construction so long as it is reasonable. Id. at 843-44. This 
rule complies with the first step of the Chevron test because Congress 
did not directly speak to the question of requiring the disclosure of 
the list price in DTC television advertisements, and nothing in the 
text or structure of the Medicare statute prohibits this rule. At the 
same time, consistent with the second step of the Chevron test, this 
rule is a permissible interpretation of the Secretary's broad authority 
to regulate for the efficient administration of the Medicare and 
Medicaid programs. As noted above, Mourning and Thorpe hold that broad 
rulemaking authority permits regulations reasonably related to program 
purposes. While we acknowledge that Congress has, indeed, provided HHS 
with various specific authorities to address drug costs and 
reimbursement rates, it does not follow that the requirements we are 
finalizing in this final rule are unauthorized. Just because Congress 
has expressly authorized particular means of addressing drug costs in 
general by authorizing generics and biosimilars and by imposing a 
rebate system for Medicaid does not signify that all other reasonable 
means are foreclosed, particularly if the other means are not 
inconsistent with the Social Security Act. The commenter's argument 
does not consider plain language of the provisions of the Social 
Security Act at issue, which, as noted previously, authorize 
regulations as may be necessary for the efficient administration of 
Medicare and Medicaid, so long as they are not inconsistent with the 
Social Security Act. For the reasons described in the proposed rule, 
the regulations we are finalizing in this rule are necessary for the 
efficient administration of Medicare and Medicaid. The Social Security 
Act's prohibition of the Secretary from interfering in Part D 
negotiations does not make the price disclosure requirement 
inconsistent with the Social Security Act. Rather, the non-interference 
provision is not relevant to whether we may require list prices be 
transparent to beneficiaries. List prices already are known to payors 
and manufacturers, so simply requiring they be made known to 
beneficiaries has no bearing on payor-manufacturer negotiations.
    Comment: Several commenters further stated that Congress's 
directive to CMS to operate the Medicare and Medicaid programs 
efficiently cannot reasonably be construed as giving CMS the authority 
to regulate prescription drug advertising and that if Congress intended 
for CMS to do so, it would have expressly given the agency that 
authority.
    Response: We disagree that explicit authority for this particular 
regulation is needed, because Congress has explicitly directed the 
Secretary to operate the Medicare and Medicaid programs efficiently and 
has expressly authorized regulations necessary to that purpose, so long 
as they are not inconsistent with the Social Security Act. Promoting 
pricing transparency, and thus efficient markets, for drugs funded 
through those programs falls within the scope of the Secretary's 
mandate. As we stated in the proposed rule, there is a clear nexus 
between the requirement we are imposing in this final rule and the 
efficient administration of Medicare and Medicaid. The DTC disclosure 
requirement is simply a way to ensure transparency of information 
necessary to minimize unreasonable expenditures, which is an important 
purpose that Congress has recognized throughout Titles XVIII and XIX of 
the Social Security Act.
    Comment: One commenter stated that Congress has prescribed other 
means to address the costs of prescription drugs and biological 
products through federal laws such as the Drug Price Competition and 
Patent Term Restoration Act of 1984 and the Biologics Price Competition 
and Innovation Act of 2009, and that if Congress intended for CMS to 
have this authority it would have given it explicitly to CMS. The 
commenter stated that Congress also has prescribed numerous, highly 
detailed methods to control prescription drug and biological product 
costs in Medicare and Medicaid, such as the Medicaid drug rebate 
statute, but has expressly prohibited CMS from interfering in 
negotiations in Medicare Part D, which means that Congress has 
addressed a course of conduct for the agency that does not permit CMS 
to regulate prescription drug and biological product prices outside of 
federal healthcare programs. This commenter stated that the disclosure 
requirement would undermine the purposes of Medicare and Medicaid by 
discouraging appropriate and medically necessary use of drugs (and not 
just ``waste'' as the proposed rule contends), which demonstrates that 
Congress did not empower the Secretary to adopt the DTC requirement as 
a cost-containment measure.
    Response: We disagree with the contention that requiring a 
disclosure of the list price is a cost control. In implementing this 
rule, we are not regulating how a manufacturer sets its list price, 
which remains entirely in the manufacturer's control. As we stated in 
the proposed rule, in order to enable consumers to make informed health 
care choices, which can, in turn, improve the efficiency for the 
Medicare and Medicaid programs, it is critical that they understand the 
costs associated with various medications. If transparency in such 
pricing prompts a manufacturer to make the business decision to reduce 
the list price of overly costly drugs, it is a desired, but by no means 
a required, outcome. Instead, this rule provides Medicare and Medicaid 
beneficiaries with important information--namely, an anchor price--they 
can use to make informed decisions about their care, including whether 
the difference between the list price and what they actually pay out of 
pocket is reasonable. For this reason, as well as the reasons described 
above in section I.C.3. of this final rule, requiring the disclosure of 
the WAC improves the efficiency of both Medicare and Medicaid.
    Finally, we disagree that this disclosure requirement is 
inconsistent with the purposes of Medicare and Medicaid. The Medicare 
program provides federally funded health insurance to the elderly and 
the disabled. Medicaid is a federal-state program that provides 
financial assistance to states to furnish medical care to needy 
individuals. As we stated in the proposed rule, there are numerous 
provisions in the Social Security Act in which Congress has recognized 
that Medicare and Medicaid should be operated in such a manner as to 
minimize unreasonable expenditures. Making sure beneficiaries 
understand the value of their benefits is fully consistent with this 
goal. Congress has acknowledged in provisions such as sections 1851 and 
1860D-1(c), which require the Secretary to broadly disseminate 
information to Medicare beneficiaries and prospective Medicare 
beneficiaries on coverage options under Medicare Parts C and D, that 
the provision of information to promote an active, informed selection 
among coverage options is important. This final rule, which requires 
disclosure of information to promote beneficiaries' understanding of 
the value of their benefits and enable them to make more informed 
choices, is similarly consistent with the programs' purposes.
    Comment: One commenter wrote that CMS is acting within its 
authority under sections 1102 and 1871 of the Social Security Act in 
proposing to require pricing information in DTC advertisements, as CMS 
has broad

[[Page 20738]]

latitude to issue regulations that advance the efficient administration 
of the Medicare and Medicaid programs.
    Response: We agree, and we thank the commenter for the support.
    Comment: One commenter specifically noted its belief that CMS lacks 
the authority to regulate broadcast, cable, streaming, and satellite 
communications.
    Response: We disagree with this comment. First, this rule does not 
regulate broadcasting. Second, as noted previously, sections 1102 and 
1871 authorize regulations as necessary for the efficient 
administration of Medicare and Medicaid, and for the reasons described 
elsewhere in this preamble, the requirements we are finalizing in this 
rule are both necessary to that purpose, and not inconsistent with the 
Social Security Act. We also note that current HHS regulations address 
broadcast advertisements. For example, we regulate marketing by 
Medicare Advantage and Part D plans, including via newspapers, 
magazines, television, radio, billboards, the internet, and social 
media. See 42 CFR 422.2260, 423.2260.
    Comment: Several commenters stated that Congress has given the FDA 
the authority to regulate DTC advertisements, not CMS. Several 
commenters stated that while the FDA has the authority to regulate DTC 
advertisements, it does not have any specific authority to require the 
listing of prices. A commenter stated that CMS lacks authority to 
promulgate a rule that would require manufacturers to violate existing 
FDA statutory or regulatory requirements.
    Response: The statutory authority to issue rules, whether under the 
Social Security Act or the Federal Food, Drug, and Cosmetic Act, rests 
with and can always be exercised by the Secretary, even if such 
authority has been delegated to the individual agencies. We take no 
position in this rule on whether FDA has the authority to require the 
listing of drug prices in DTC advertisements. Whether FDA possesses 
such authority is not dispositive of the question of CMS's authority to 
implement the disclosure requirement necessary for the efficient 
administration of Medicare and Medicaid. Indeed, given CMS's role as an 
agency that reimburses for drugs, it is appropriate that CMS impose the 
price disclosure requirement, as it is the Medicare and Medicaid 
programs that bear the cost of drugs with excessively high prices.
    Comment: One commenter stated that CMS has not drawn a rational 
connection between its proposal and high drug prices and provides no 
explanation for subjecting only television advertisements to the 
proposal. As such, the commenter contended that the proposal is 
arbitrary and capricious.
    Response: We disagree with this comment. As discussed in the 
proposed rule, HHS has concluded that the rule has a clear nexus to the 
Social Security Act. In numerous places in the Act, Congress recognized 
the importance of administering the Medicare and Medicaid programs in a 
manner that minimizes unreasonable expenditures. Efficient 
administration of both Medicare and Medicaid, therefore, encompasses 
federal efforts to achieve value for funds spent in the Medicare and 
Medicaid programs. The transparency required by the disclosure 
requirement will provide beneficiaries with relevant information about 
the costs of prescription drugs and biological products, so they can 
make informed decisions that minimize costs, both for themselves and 
the Medicare and Medicaid programs. As discussed above in section I.C.2 
of this final rule, studies suggest that DTC advertising directly 
affects drug utilization and exerts pressure to prescribe. The list 
price disclosure requirement is rational because it will require the 
price information to be transmitted at the same time as the rest of the 
advertisement; thus, it will be a seamless and meaningful way to 
provide concurrent, important context (i.e., the list price) in a way 
that is low-cost for the manufacturer, and low-burden--but high-
impact--for affected beneficiaries. It is appropriate and rational to 
implement this policy for only television advertisements because 
television advertising makes up over two thirds of the DTC spend for 
pharmaceuticals.\24\ Additionally, television is a universal medium 
widely watched by beneficiaries, and therefore it is an efficient and 
effective means to ensure beneficiaries are provided with appropriate 
information. Traditional television reaches about 87 percent of the 
adult population, with older adults spending the most time watching 
television (Age 50-64: 5 hours and 38 minutes per day; Age 65+: 6 hours 
and 55 minutes per day).\25\
---------------------------------------------------------------------------

    \24\ Schwartz LM and Woloshin S. Medical Marketing in the United 
States, 1997-2016. JAMA. 2019 Jan 1;321(1):80-96.
    \25\ The Nielsen Total Audience Report Q2 2018. https://www.nielsen.com/content/dam/corporate/us/en/reports-downloads/2018-reports/q2-2018-total-audience-report.pdf.
---------------------------------------------------------------------------

B. General Comments on Direct-to-Consumer Advertising

    We received general comments on the merits of DTC advertising.
    Comment: Many commenters recommended against allowing DTC 
advertising at all. Some commenters noted that DTC advertisements leads 
to longer, less efficient patient encounters and reduced patient 
confidence in prescribers' advice. Commenters also stated DTC 
advertising increases inappropriate prescribing and drives demand for 
products that patients may not need. Many other commenters stated that 
DTC advertisements provide an important source of patient education by 
increasing disease awareness and informing patients and caregivers 
about new treatments.
    Response: Eliminating DTC advertising is outside of the scope of 
this rule. We agree that DTC advertisements can both drive utilization 
and provide a source of patient education, and we are implementing the 
list price disclosure requirement so as to provide additional 
information as a resource to educate and inform patients in a manner 
that can temper the increases in demand that DTC advertising causes.
    Comment: Many commenters support including the list price of 
prescription drugs and biological products in DTC advertising as an 
important step toward providing price transparency in our health care 
system. Many commenters note that being aware of the price of goods is 
essential for an efficient and competitive market to work. 
Additionally, many commenters note that drug cost is an important 
concern for patients, and this information will be important to allow 
them to have a meaningful conversation with their providers to select 
the best, most cost-effective, and most appropriate overall therapy.
    Response: We appreciate the support for our proposal, and we agree 
that requiring a list price in DTC television advertising will provide 
valuable new information for patients to empower them to engage with 
their providers and engage in their care decisions. We agree that 
pricing information is essential for creating a more transparent health 
care system and an important element in creating a free and competitive 
market that will allow patients to be engaged consumers.

C. Use of Wholesale Acquisition Cost as List Price

    In the proposed rule, we sought comment on whether WAC is the 
amount that best reflects the list price

[[Page 20739]]

for the stated purposes of price transparency and comparison shopping.
    Comment: A few commenters expressed concern that the WAC is not 
standardized or well-defined enough to serve as a meaningful price 
point. A few commenters noted that the WAC varies by National Drug Code 
(NDC) and requested clarification on which NDC would be used in 
determining the WAC to be included in advertisements.
    Response: We disagree that the WAC is not standardized or well-
defined. Congress defined WAC in section 1847A of the Social Security 
Act, and we are finalizing a definition in this rule that parallels the 
statutory definition. WAC has been used in Medicare Part B drug payment 
policy for more than a decade without significant concern that it is 
not a meaningful price point.\26\ In Medicare Part D, the negotiated 
price is a function of pharmacy-level charges, which are typically 
expressed in network pharmacy contracts as a function of the WAC (e.g., 
((WAC x 1.2) - 15% + $2.00)). With respect to the commenters' request 
for clarification about NDCs, we note that the regulation requires the 
list price for a 30-day supply or typical course of treatment. To the 
extent an NDC reflects an amount of the manufacturer's product other 
than a 30-day supply or typical course of treatment, the manufacturer 
will need to use reasonable assumptions to determine the appropriate 
list price for a 30-day supply or typical course of treatment.
---------------------------------------------------------------------------

    \26\ The WAC is used in Part B in two ways. First, Medicare Part 
B pays 106 percent times the lesser of the Average Sales Price (ASP) 
or WAC. See Social Security Act sec. 1847A(b)(4). Second, when a new 
Part B drug or biological product comes to market and has no 
established ASP, the Secretary may use the drug's or biologic's WAC 
or methodologies in effect on November 1, 2003 to determine the Part 
B payment amount. See Social Security Act sec. 1847A(c)(4).
---------------------------------------------------------------------------

    Comment: Several commenters supported the use of the WAC. One 
commenter noted that the WAC is a well understood price point that is 
defined in statute and applies to every drug, and that because it 
serves as a starting point for negotiating prices, it directly impacts 
patients' costs. A few commenters noted that the full WAC is paid by 
the uninsured and by beneficiaries with high deductibles. Others noted 
that patients could estimate their out of pocket costs from the WAC if 
they understand the percentage coinsurance of their coverage. A few 
noted that due to variation in other price points, it would be 
administratively burdensome for manufacturers to display any price 
other than the WAC and that the proposal is easy for manufacturers to 
comply with. A few commenters noted their belief that with the proposed 
cost variation disclaimer, the WAC is an appropriate price point to 
share in advertisements. Others noted that the WAC is primarily 
informative for single-source drugs, which make up the majority of DTC 
advertisements.
    Response: We appreciate these commenters' support for the use of 
the WAC, and agree that it is an appropriate metric for disclosure in 
DTC television advertisements for the reasons commenters note. The WAC 
is the most commonly used benchmark in the pharmacy purchasing of 
drugs, which means that it is a single, manufacturer-published price 
that excludes rebates and discounts, and therefore is the closest 
metric we have to a generalizable list price that applies to all 
patients prior to the application of insurance coverage, making this an 
actual list price of the drug. While insurance coverage will affect 
what the patient pays OOP for the drug, as stated above the WAC is an 
important factor for determining the final price that patients will pay 
for the drug. Moreover, the WAC is a real price that manufacturers set 
for their drugs and share with various private price compilers such as 
Red Book, Medispan, and First DataBank. WAC publishers sell 
subscriptions to their compilations, allowing pharmacies and others 
willing to pay annual subscription fees to access current prices. For 
all of these reasons, the WAC is a relevant and important price point 
in the drug supply chain.
    Comment: Several commenters recommended that additional or 
different information should be required in advertisements other than 
the WAC. Specifically, commenters requested that DTC advertisements 
include detail on what a patient may expect to pay out of pocket. One 
commenter recommended that advertisements include both the WAC and 
expected out of pocket costs. A few commenters recommended that 
advertisements include rebate, discount and formulary information as 
well as details for consumers to make a coinsurance calculation. One 
commenter noted that patients want information about what payment 
support options may be available to them. One commenter expressed 
concern that the proposed disclosure does not give patients information 
about what other drug options may be available. A few commenters 
recommended that advertisements include appropriate explanations of 
what the WAC means.
    Response: We decline to require manufacturers to provide pricing 
information in addition to the WAC of the drug being advertised because 
this rule is targeted to providing the minimum amount of cost 
information that will allow a patient to engage in shared decision 
making with their prescriber. We also decline to require that DTC 
advertisements explain what the WAC means, as the required disclosure 
language refers to the ``list price,'' and does not the term WAC. 
Further, the rule is targeted to require disclosure of the most 
essential price information, but manufacturers may include additional 
information if they so choose, so long as the information does not 
obscure safety and effectiveness information.
    Comment: One commenter requested clarification on whether standard 
manufacturer costs would be used if the proposal were applied to the 
inpatient setting.
    Response: The requirement we are finalizing in this rule will 
require DTC television advertisements to disclose the WAC of any drug 
for which payment is available under Medicare or Medicaid, regardless 
of the care setting.
    Comment: A few commenters expressed concern that for drugs that 
lack therapeutic alternatives, disclosure of the WAC will be irrelevant 
because patients do not have cheaper options to choose from.
    Response: We disagree. Even if a drug does not have any cheaper 
therapeutic alternatives, it will be useful to the patient and his or 
her caregivers to know its list price, as it will inform the 
conversation about anticipated costs.
    Comment: Many commenters agree that the WAC is the best price point 
to include in DTC television advertisements because it is a single, 
easily accessible metric created by manufacturers and available to 
wholesalers, and is the most common benchmark used in pharmacy 
purchasing and reimbursement. One commenter recommended using National 
Average Drug Acquisition Cost (NADAC), which is a CMS-published 
benchmark created through a national survey of actual invoices paid by 
retail pharmacies to wholesalers. The commenter suggested that it is 
more accurate, especially for generic drugs. One commenter noted that 
alternative price points are more relevant to what patients pay, such 
as the Federal Upper Limit (FUL) and the Maximum Allowable Cost (MAC), 
which reflect rebates and discounts provided by manufacturers. One 
commenter recommended against displaying the average wholesale price 
(AWP), average acquisition cost (AAC), or national average drug 
acquisition cost (NADAC).
    Response: We appreciate the feedback on alternative metrics for the 
list price.

[[Page 20740]]

We agree with the commenters that the WAC is an appropriate metric to 
use as a list price because it is commonly used, easily available and 
manufacturer-developed. We appreciate the comments that noted that the 
WAC is not available for all drugs. However, not only is the WAC 
generally available for the overwhelming majority of drugs, but it is 
available for the more expensive drugs that are commonly advertised on 
television, as shown in Table 1. All drugs that are distributed through 
a wholesaler have a WAC, including all of the top 20 drugs that have 
the highest DTC advertising spending. While we agree that other price 
metrics may be useful, we decline to adopt any of these other metrics 
as alternatives because we believe the WAC is a better metric for 
purposes of the disclosure requirement. As noted previously, a 
manufacturer sets its WAC, and therefore readily knows the WAC for all 
of its advertised products. In addition, generic drugs are rarely 
advertised on television, so the NADAC, which tracks generic prices, is 
not only less relevant for purposes of this rule, but is also one step 
removed from information--WAC--that the manufacturer already has at 
hand.
1. WAC Is a Benchmark for Federal and Commercial Healthcare Programs
    A drug's WAC has relevance as a benchmark in both federal and 
commercial health care programs. In the commercial sector, nearly half 
of all beneficiaries have high deductible plans including those with 
plans purchased on the Health Insurance Exchange under the Affordable 
Care Act.\27\ An analysis of commercial health plans also determined 
that nearly half of all drug spending is subject to deductible or 
coinsurance.\28\
---------------------------------------------------------------------------

    \27\ Cohen R, Martinez M, and Zammitte E. Health Insurance 
Coverage: Early Release of Estimates From the National Health 
Interview Survey, January-March 2018. National Center for Health 
Statistics. https://www.cdc.gov/nchs/data/nhis/earlyrelease/Insur201808.pdf.
    \28\ Rae M, Cox C, and Sawyer B. What are recent trends and 
characteristics of workers with high drug spending? Peterson-Kaiser 
Health System Tracker. https://www.healthsystemtracker.org/chart-collection/recent-trends-characteristics-workers-high-drug-spending-2016/#item-deductibles-and-coinsurance-represent-a-larger-share-of-out-of-pocket-drug-spending-than-a-decade-ago.
---------------------------------------------------------------------------

    Under Medicare Part B, after meeting the annual $185 deductible, 
beneficiaries generally pay a 20 percent co-insurance for all items and 
services, including prescription pharmaceuticals. When a Medicare Part 
B drug is new, it may be reimbursed for a period of time based on its 
WAC rather than its ASP. After that time, Medicare pays for 
prescription drugs based on the ASP. Sixty percent of the top 50 Part B 
drugs by spending have an ASP that is less than 10 percent different 
from the WAC.
    Medicare Part D allows beneficiaries to choose a private health 
plan offering prescription drug benefits, and these include a 
standalone prescription drug plan (PDP) for those with original 
Medicare or a Medicare Advantage plan that includes prescription drug 
coverage (MA-PD). In 2018, the majority of Part D enrollees had some 
form of deductible, and more than 70 percent of standalone Part D plans 
offered in 2019 included a deductible.\29\ The top 10 PDPs by 
enrollment, which represents 81 percent of standalone PDP enrollment, 
all charge coinsurance rather than copayments for drugs on nonpreferred 
tiers, charging 32 percent to 50 percent of each prescription's 
negotiated price (which closely resembles the WAC).\30\ All Part D 
plans may charge coinsurance for drugs on the specialty tier. As such, 
the overwhelming majority of Part D beneficiaries are exposed to OOP 
costs based on the negotiated price (which closely resembles the WAC).
---------------------------------------------------------------------------

    \29\ MedPAC Report to the Congress: Medicare Payment Policy. 
March 2019.
    \30\ MedPAC Report to the Congress: Medicare Payment Policy. 
March 2019.
---------------------------------------------------------------------------

    Table 1 includes the 20 drugs with the highest television 
advertising expenditures during CY2016. The average WAC for these drugs 
is $3,473 (range: $189-$16,937.91) per month.
    Two of the drugs are covered by Medicare Part B, which requires 
Medicare beneficiaries to pay a coinsurance equal to 20 percent of a 
drug's ASP-based payment allowance for physician-administered drugs. 
For the two Part B drugs, the ASP of the drug closely resembles the 
WAC, suggesting that a beneficiary who knows the drug's WAC can easily 
approximate their OOP costs.
    Eighteen of the drugs are covered by Medicare Part D, in which a 
beneficiary's OOP spending is dependent on the plan benefit design. For 
these 18 Part D drugs, the mean per month WAC was $3,586.44. We used 
the benefit design of the two PDPs with the lowest and highest premiums 
available to a Medicare beneficiary in Washington, DC, to estimate the 
formulary coverage and OOP costs for these 18 drugs. In the low-premium 
plan, all 18 drugs were subject to a deductible, during which time the 
beneficiary pays the negotiated price until entering the next phase of 
the benefit, seven (39 percent) were on the preferred tier and subject 
to a copayment after meeting the deductible, six (33 percent) were on 
the non-preferred or specialty tier and subject to coinsurance after 
meeting the deductible, and five (27 percent) were non-formulary drugs 
for which no insurance benefit is available (unless the beneficiary 
obtains a formulary exception). Thus, OOP spending was based on the WAC 
for all of the drugs before meeting the deductible, and 61 percent of 
the drugs after meeting the deductible. In the high-premium plan, all 
18 drugs were subject to a deductible, during which time the 
beneficiary pays the negotiated price until entering the next phase of 
the benefit, five (27 percent) were on the preferred tier and subject 
to a copayment after meeting the deductible, eight (33 percent) were on 
the non-preferred or specialty tier and subject to coinsurance after 
meeting the deductible, and five (27 percent) were non-formulary drugs 
for which no insurance benefit is available (unless the beneficiary 
obtains a formulary exception). Thus, OOP spending was based on the WAC 
for all of the drugs before meeting the deductible, and 61 percent of 
the drugs after meeting the deductible. Of note, the WAC was often less 
than the Part D plan's negotiated price, and the high-premium plan 
subjected beneficiaries to coinsurance more often than the low-premium 
plan for the drugs with the highest DTC ad spending.
    Thus, when drugs are purchased early in the year before a 
deductible has been met, or during the plan year when coinsurance 
applies, or at any time when a drug is not covered by insurance, the 
patient often pays the WAC or cost-sharing based on the WAC, making the 
WAC highly relevant. Knowing the WAC may also help a beneficiary begin 
a conversation about less expensive alternatives, prompt them to ask 
their pharmacist if a lower-cost option would be available, or 
encourage them to choose a plan with more favorable cost-sharing 
requirements.

[[Page 20741]]



                      Table 1--Comparison of List Price and Out of Pocket Cost Under High and Low Premium Plans for the Drugs With the Highest DTC Advertising Expenditures
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Representative low premium plan                                        Representative high premium plan
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
          Drug (quantity)              WAC per                          Negotiated                                                              Negotiated
                                        month             Tier           price and    Initial    Coverage   Catastrophic          Tier           price and    Initial    Coverage   Catastrophic
                                                                        deductible   coverage       gap                                         deductible   coverage       gap
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Humira (2 pens)...................       $5,174   Specialty...........      $5,169      $1,292      $1,292         $258   Specialty...........      $5,097      $1,325      $1,274          $255
Lyrica (60 tabs)..................          468   Preferred Brand.....         446          40         117           23   Preferred Brand.....         462          42         115            23
Xeljanz (60 tabs).................        4,481   Specialty...........       4,477       1,119       1,119          224   Non-formulary.......       5,377       5,377       5,377         5,377
Trulicity (4 pens)................          730   Preferred Brand.....         730          40         182           36   Nonpreferred Drug...         720         345         180            36
Xarelto (30 tabs).................          448   Preferred Brand.....         448          40         112           22   Preferred Brand.....         442          42         110            22
Otezla (60 tabs)..................        3,398   Non-formulary.......       4,078       4,078       4,078        4,078   Non-formulary.......       4,078       4,078       4,078         4,078
Eliquis (60 tabs).................          444   Preferred Brand.....         444          40         111           22   Preferred Brand.....         438          42         110            22
Keytruda..........................        4,719   Part B
Ibrance (30 tabs).................       16,938   Specialty...........      17,608       4,402       4,402          880   Specialty...........      16,686       4,338       4,171           834
Jardiance (30 tabs)...............          493   Preferred Brand.....         493          40         123           25   Preferred Brand.....         486          42          66            24
Rexulti (30 tabs).................        1,109   Specialty...........       1,109         277         277           55   Nonpreferred Drug...       1,093         525         273            55
Taltz (1 pen).....................        5,162   Non-formulary.......       6,442       6,442       6,442        6,442   Non-formulary.......       6,194       6,194       6,194         6,194
Verzenio (60 tabs)................       12,087   Specialty...........      12,510       3,128       3,128          626   Nonpreferred Drug...      11,907       5,715       2,977           595
Prevnar-13........................          189   Part B
Eucrisa (1 tube)..................          633   Non-formulary.......         745         745         745          745   Non-formulary.......         745         745         745           745
Latuda (30 tabs)..................        1,223   Nonpreferred Drug...        1223         562         306           61   Nonpreferred Drug...       1,200         528         300            60
Victoza (3 pens)..................          922   Preferred Brand.....         921          40         230           46   Preferred Brand.....         908          42         227            45
Farxiga (30 tabs).................          492   Preferred Brand.....         492          40         123           25   Nonpreferred Drug...         486         233         121            24
Enbrel (4 pens)...................        5,174   Non-formulary.......       6,209       6,209       6,209        6,209   Specialty...........       5,097       1,325       1,274           255
Cosentyx (1 pen)..................        5,179   Non-formulary.......       4,661       4,661       4,661        4,661   Non-formulary.......       4,661       4,661       4,661         4,661
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: In Table 1, we looked at the Top 20 drugs with the highest television advertising expenditures during CY 2016, per Kantar Media. We filled out the WAC for each of the drugs based on the
  common monthly package size using Analysource and ProspectoRx data. Then, we selected the plan in the Washington DC area (Zip 20201) that had the lowest monthly premium (WellCare Value
  Script (PDP)--$14 monthly premium) and a choice plan with the highest monthly premium (Express Scripts Medicare (PDP)--Choice--$97.20 monthly premium). We identified the tiers for the drugs
  based on the respective formularies for each plan. Then, we used the Plan Finder website for each plan to identify the deductible and initial coverage for each drug to estimate the OOP costs
  for beneficiaries before they enter catastrophic coverage phase. The WAC was obtained from Analysource and ProspectoRx data. Tiering info was obtained from Express Scripts Medicare Choice
  PDP 2019 Formulary and WellCare Value Script PDP 2019 Formulary. Deductible and Initial Coverage Period for Value Plan (WellCare Value Script (PDP)) OOP amounts were obtained from the
  Medicare.gov Part D Planfinder for an applicable beneficiary living in Washington DC (20201). Deductible and Initial Coverage Period for Choice Plan (Express Scripts Medicare (PDP)--Choice)
  OOP amounts were obtained from the Medicare.gov Part D Planfinder for an applicable beneficiary living in Washington DC (20201).

2. Absence of WAC as Potentially Misleading
    Comment: Many commenters strongly opposed the use of the WAC and 
expressed concern that the WAC is not a meaningful measure of what a 
patient will pay for a drug and is instead misleading and confusing. 
Commenters noted that, based on insurance coverages, rebates, patient 
assistance programs, and negotiated discounts, consumers could pay less 
for a drug with a higher list price than for a drug with a lower list 
price and that disclosure of the WAC does not provide accurate or 
relevant information to patients. Commenters expressed concern that the 
proposal will deter patients from seeking appropriate care, as some may 
believe the WAC represents their out of pocket costs. Commenters noted 
their belief that the proposal puts the burden of increasing drug 
prices on consumers and stated that disclosing the price out of context 
will overemphasize costs. Commenters noted that the WAC is useful only 
if patients have a detailed understanding of the provisions of their 
drug coverage. Commenters stated that if information about OOP costs 
cannot be included, we should not require inclusion of any prices at 
all.
    Response: We disagree that disclosure of a drug's WAC would be 
misleading. For the reasons stated above, WAC is a highly relevant data 
point with significance in both federal and commercial health care. 
Indeed, it is our view that the absence of a drug's WAC would make a 
DTC television advertisement potentially misleading because consumers 
appear to dramatically underestimate their OOP costs for expensive 
drugs, but once they learn the WAC they become far better able to 
approximate their OOP costs. In the 2019 JAMA study,\31\ published 
after the proposed rule was issued, researchers asked subjects to 
estimate their monthly OOP costs for a drug with a hypothetical WAC of 
$15,500 per month. When subjects were provided no information about 
price, they responded that their OOP costs would be, on average, $78 
per month or about 0.5 percent of the WAC. However, when subjects were 
told the WAC, they more accurately determined their (OOP) costs at 
$2,787 or about 18 percent of the WAC. We do not know whether subjects 
used their own plans as the bases for their calculations and if so, the 
report does not reveal their plans' coinsurance rates. Nonetheless, the 
informed estimates were far closer to what one would expect to see paid 
at the pharmacy counter under most plans than the uninformed assessment 
of $78. This study strongly suggests that advertisements without the 
WAC may lull viewers into a false sense affordability and may therefore 
be potentially misleading under the relevant state laws. See, e.g., 
Calif. Bus. & Prof. Code sec. 17200.
---------------------------------------------------------------------------

    \31\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'').
---------------------------------------------------------------------------

    We also disagree with commenters' concerns that the list price may 
be more confusing than beneficial to patients because it is not related 
to their OOP costs. As noted above, consumers may be better able to 
predict their OOP costs when they know a drug's WAC. In addition, the 
list price will be new information to patients, and a starting point 
for conversations among prescribers, patients and caregivers. We 
believe it would be too complicated to require manufacturers to try to 
disclose every possible cost sharing outcome in a DTC television 
advertisement, but requiring disclosure of the list price will help 
prompt further discussions that help consumers make informed decisions 
about appropriate treatment options. (As discussed elsewhere in this 
preamble, the rule also requires inclusion of the statement, ``If you 
have health insurance that covers drugs, your cost may be different,'' 
a further disclosure that provides context for consumers.) As noted 
above, the list price is relevant for uninsured patients, and insured 
patients with deductibles and coinsurance as is frequently the case 
under Part D for high cost drugs advertised on television.
    We disagree that disclosure of a drug's WAC in DTC television 
advertisements will overemphasize costs or deter patients from seeking 
care. As noted in the 2019 JAMA Study, the risk of patients not seeking 
care is mitigated

[[Page 20742]]

when the advertisement includes a caveat that OOP costs may be 
less.\32\
---------------------------------------------------------------------------

    \32\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'').
---------------------------------------------------------------------------

    Comment: Some comments cite evidence that the disclosure of the 
list price may dissuade patients from discussing certain medical 
treatments with their prescribing health care practitioners.\33\ In 
support of the dissuasion argument, at least one comment also cited to 
an article about a study that concluded that high deductibles 
discourage patients from seeking prompt medical care.\34\ Another 
comment disagreed, asserting that companies advertising their products 
expend considerable resources to ensure that their advertising 
communicates effectively. The comment further asserts that consumers 
who are able to understand and make use of the information about a 
prescription drug or biological product described in the advertisement 
would have the capacity to understand and make use of the pricing 
information.
---------------------------------------------------------------------------

    \33\ Dusetzina SB and Mello MM. Disclosing Prescription-Drug 
Prices in Advertisements--Legal and Public Health Issues. N Engl J 
Med. 2018 Dec 13;379(24):2290-2293.
    \34\ Gordon S. High Deductibles May Mean Poorer Diabetes Care. 
U.S. News & World Report, Nov. 20, 2018. https://health.usnews.com/health-care/articles/2018-11-20/high-deductibles-may-mean-poorer-diabetes-care.
---------------------------------------------------------------------------

    Response: We find the latter comment more persuasive. The article 
from the New England Journal of Medicine was published under the 
``Perspectives'' heading, which the journal describes as ``[c]over[ing] 
timely, relevant topics in health care and medicine in a brief, 
accessible style.'' See https://www.nejm.org/author-center/article-types. The authors opine that ``a potential unintended consequence of 
price disclosure may be to dissuade patients from seeking care because 
of the perception that they cannot afford treatment'' (emphasis 
added).\35\ This statement of the authors' opinion is not based on any 
data, and we do not find it persuasive. We are also not persuaded that 
the study on high deductibles undermines the DTC ad requirement. That 
study concluded that individuals who transitioned from low-deductible 
to high-deductible insurance demonstrated a delay in seeking care for 
certain diabetes complications, as compared to peers who remained in 
low-deductible plans. Furthermore, the study suggests that people with 
diabetes should select benefit designs that are appropriately tailored 
to their expected use of care. But the proposition that individuals, if 
informed of a drug's list price, will necessarily delay visiting a 
doctor and discussing treatment options (including but not limited to 
the advertised drug) does not necessarily follow from the study's 
conclusion.
---------------------------------------------------------------------------

    \35\ Dusetzina SB and Mello MM. Disclosing Prescription-Drug 
Prices in Advertisements--Legal and Public Health Issues. N Engl J 
Med. 2018 Dec 13;379(24):2290-2293.
---------------------------------------------------------------------------

    In contrast, as we discussed in section I.C., price transparency is 
essential to enable consumers to make informed health care choices, 
which will in turn improve the efficiency of the Medicare and Medicaid 
programs, as it is critical that beneficiaries understand the costs 
associated with various medications. This is especially important where 
consumers have significant cost sharing obligations. Increasing drug 
price transparency changes patient behavior, and price transparency is 
an accepted strategy for addressing our increasing health care costs. 
Additionally, price transparency is recognized as a low-risk 
intervention because it has the potential to reduce health care costs 
without otherwise affecting health care delivery and reimbursement.\36\
---------------------------------------------------------------------------

    \36\ Sinaiko AD and Rosenthal MB. Increased price transparency 
in health care--challenges and potential effects. N N Engl J Med. 
2011 Mar 10;364(10):891-4.
---------------------------------------------------------------------------

    Comment: Many commenters note that including the list price could 
be a psychological burden for patients, whether or not it is related to 
their OOP costs, because many advertised drugs are expensive, sole 
source drugs for severe, debilitating, or terminal diseases. This means 
patients often will not have the opportunity to ``shop'' for lower cost 
alternatives. Some commenters note that patients should not be the one 
bearing the responsibility for making cost-benefit analyses when they 
are undergoing active treatment for severe disease, so it is 
inappropriate to include the list price as an element for patients to 
consider as they enter active treatment. Commenters also stated that 
including the list price could also have the unintended consequence of 
patients' electing to use higher-cost drugs, particularly if there is 
no difference in OOP costs, because price is seen as an indicator of 
quality in other categories of consumer goods.
    Response: While we acknowledge that a person's clinical needs or 
health condition may make it infeasible for them to seek lower cost 
drug therapies, we disagree that this makes the provision of list price 
information inappropriate. We believe providing this information 
regarding price is better than providing no information, even if the 
additional information is not considered by a particular patient and 
his or her providers in making treatment decisions. Contrary to 
commenters' assertions, it may be more burdensome for patients and 
their caregivers not to have pricing information to take into 
consideration as they determine the most appropriate course of action. 
Moreover, we would not characterize any decision to prescribe a higher 
cost drug, based on consideration of all the applicable factors 
including safety, efficacy, side effects, and price, as an unintended 
consequence of this rule.
    Comment: Commenters noted that because WAC has no relation to what 
patients will actually pay, it is unreasonable to assume the proposal 
will have any impact on treatment choices or the cost of drugs.
    Response: We disagree. As discussed above, studies show that 
consumer behavior is affected by DTC advertisements, and that consumers 
who know the list price may be better able to predict their OOP costs. 
This evidence leads to the conclusion that the additional data point, 
which, as discussed elsewhere in this rule, is highly relevant and 
would have an effect on treatment choices and, potentially, the cost of 
drugs.
    Comment: A few commenters expressed concern that disclosing the WAC 
fails to account for the value of drugs and could lead to consumers 
comparing drugs based on the WAC alone, without considering important 
factors such as safety and effectiveness.
    Response: We disagree that providing this limited price information 
would lead to decision making that disregards safety and effectiveness. 
Given that the drugs and biological products that are subject to this 
rule are dispensed upon a prescription, and therefore require 
consultation with a prescriber, the choice of an appropriate treatment 
option is not based solely on a drug's WAC.
    Comment: A few commenters expressed concern that the proposed 
disclosure of the WAC in DTC advertisements undermines FDA efforts to 
make advertisements simple and clear to patients.
    Response: We disagree. The DTC disclosure requirement we are 
finalizing in this rule requires simple, standardized text be placed at 
the end of the ad, and would not make the advertisement any more 
complicated. However, we remind manufacturers that they have to comply 
with all applicable FDA requirements and that nothing in this rule is 
intended to supersede any FDA requirement.
    Comment: Some commenters note that providers and prescribers do not

[[Page 20743]]

have the time, resources, or expertise to have conversations with 
patients about the cost of drugs or biological products, so it may be 
inappropriate to provide list price information to patients encouraging 
them to discuss this information with their providers or prescribers. 
Commenters stated that DTC television advertising may actually decrease 
the quality of conversations between patients and their providers 
because it will force the provider to dedicate a portion of their 
limited time with the patient discussing a list price unrelated to 
their OOP costs that the physicians are not trained to discuss. Some 
commenters note that the payor or the pharmacists may be better 
equipped to educate the patient on the cost of therapies.
    Response: This rule does not require that providers and prescribers 
discuss pricing or costs with their patients. Rather, this rule merely 
requires that relevant information be shared with patients should 
providers and prescribers wish to discuss drug costs with them. We 
believe it is important that providers discuss any barriers to 
medication adherence, such as cost, with their patients to determine if 
consideration of alternative therapies is needed. The availability of 
list price information will not decrease the quality of doctor-patient 
interaction or require any particular training or resources. In fact, 
it may encourage patients to discuss any barriers to medication 
adherence with their providers. As discussed in section F of this final 
rule, certain Medicare billing codes already account for the resources 
associated with counseling patients on therapeutic options.
3. Use of a $35 Threshold
    We sought comment as to whether the cost threshold of $35 to be 
exempt from compliance with this rule is the appropriate level and 
metric for such an exemption. We proposed this threshold because it 
approximates the average copayment for a preferred brand drug. We also 
considered incorporating a range for exempted drugs defined as less 
than $20 per month for a chronic condition or less than $50 for a 
course of treatment for an acute condition. In particular, we 
considered whether ``chronic condition'' and ``acute condition'' are 
sufficiently distinguishable to accomplish the stated regulatory 
purpose. We sought comment on alternative approaches to determining a 
cost threshold, whether or not the threshold should be updated 
periodically, and if so, how the threshold should be updated.
    Comment: Some commenters agree that $35 is a reasonable cost 
threshold to be exempt from compliance with this rule. Many commenters 
recommend that we do not include a threshold price for drugs that would 
exempt them from including their list price in DTC advertising. They 
note that if one of the purposes of this rule is to improve price 
transparency, then it is important to provide the prices on all drugs 
and biological products that are subject to DTC advertising. Some of 
these commenters also note that it is not appropriate to assume that 
$35 is a good threshold as an approximation of the co-payment of an 
average copayment for a preferred brand drug because $35 may still be a 
financial burden for many patients, and awareness of this amount could 
be useful for patients. One commenter recommended that we reduce the 
threshold to $25 because that is also representative of copayments for 
brand drugs. Another commenter recommended that we increase the 
threshold to $100 to avoid inundating patients with price 
notifications, and potentially reducing their effect. Finally, several 
commenters noted that it may be confusing to patients on why some drugs 
and biologic products have a list price included in their DTC 
television advertisements, while others do not. To avoid this 
confusion, the price should be included in all advertisements. We did 
not receive any comments on whether or how often this threshold would 
need to be revisited.
    Response: We agree with commenters that $35 is an appropriate list 
price threshold for exemption from compliance with this rule. We 
disagree with commenters that suggested there should not be an 
exemption from the list price disclosure requirement. Since patients 
with the traditional benefits with no low income cost subsidies can 
already expect to pay up to $35 in cost sharing for a preferred brand 
drug, knowing the list price of low-cost drugs is unlikely to affect 
their drug purchasing decisions. We appreciate commenters' 
recommendation to reduce the threshold to $25, but we continue to 
believe that $35 is a more appropriate threshold, given that it 
frequently is the copayment amount for preferred brand drugs. For the 
same reason, we decline to adopt the suggestion to raise the threshold 
to $100. Also, there are likely not many additional drugs that would 
receive the exemption if we move it from $35 to $100. Finally, we 
disagree that it will be confusing to patients that some drugs and 
biological products include prices in their DTC advertising while 
others do not because drugs and biological products that do not have 
the price displayed will be within the range of what they would expect 
to pay for a prescription regardless of insurance coverage or 
structure, or if they are uninsured. DTC advertisements that do not 
have prices will be just like advertisements on television today. 
Moreover, nothing in this rule prevents a manufacturer from including 
its WAC even though it is exempt. Advertisements with prices will 
simply provide additional information that can help beneficiaries 
engage their doctors and make appropriate treatment decisions.

D. First Amendment Considerations

1. Background--Zauderer/Central Hudson
    As an initial matter, the speech here at issue does not implicate 
core First Amendment interests. Manufacturers already disclose the very 
same information at issue, their products' WACs, to purchasers as well 
as publishers of various pricing databases and other compendia. As the 
Supreme Court has explained, ``Our lodestars in deciding what level of 
scrutiny to apply to a compelled statement must be the nature of the 
speech taken as a whole and the effect of the compelled statement 
thereon.'' Riley v. Nat'l Fed'n of Blind, 487 U.S. 781, 796 (1988). The 
key concern relating to compelled speech is having the government 
compel a speaker to convey a message with which it disagrees. Johanns 
v. Livestock Mktg. Ass'n, 544 U.S. 550, 557 (2005); see, e.g., Nat'l 
Inst. of Family and Life Advocates v. Becerra, 138 S. Ct. 2361, 2379 
(2018) (``NIFLA'') (law at issue ``compel[ed] individuals to contradict 
their most deeply held beliefs, beliefs grounded in basic 
philosophical, ethical, or religious precepts'') (Kennedy, J., 
concurring). More routine disclosure requirements are ``simply not the 
same as forcing a student to pledge allegiance[ ] or forcing a 
Jehovah's Witness to display the motto `Live Free or Die.' '' Rumsfeld 
v. Forum for Academic & Institutional Rights, Inc., 547 U.S. 47, 62 
(2006). The ``disclos[ure of] objective facts and statistics'' about 
price information ``is simply not the same as forcing a speaker to 
support or accommodate an idea, belief, or opinion.'' Beeman v. Anthem 
Prescription Management, LLC (``Beeman''), 315 P.3d 71, 84 (Cal. 2013) 
(citations and internal punctuation omitted).
    It is therefore well established that the government may, 
consistent with the First Amendment, require the disclosure of factual 
information in marketing

[[Page 20744]]

commercial products where the disclosure is justified by a government 
interest and does not unduly burden protected speech. Zauderer v. 
Office of Disciplinary Counsel, 471 U.S. 626 (1985); NIFLA, 138 S. Ct. 
at 2372. The rule's required disclosure meets this test. The list price 
is a fact that is controlled by the manufacturer; it does not represent 
a government viewpoint or policy message. Price transparency enhances 
the information available in the market and allows markets to function 
more efficiently to the benefit of consumers. And the brief textual 
statement placed at the end of a television advertisement would not 
unduly burden the advertiser's ability to convey its message in the 
remainder of the advertisement.
    Many comments assert that the rule should be evaluated under the 
intermediate scrutiny test for commercial speech articulated in Central 
Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557 (1980). 
Under that test, agencies can regulate speech where the regulation 
advances a substantial government interest and the regulation is no 
more extensive than necessary to serve that interest.
    Although we believe that Zauderer provides the appropriate 
framework for review, the rule also satisfies the elements of the 
Central Hudson test. The government interest is clear. Prescription 
drug spending in the United States has increased dramatically in recent 
years and is projected to account for an increasing share of the 
country's health care spending. This affects consumers both through 
their own OOP expenses and through the expenses borne by Medicare and 
Medicaid and taxpayers. Price transparency helps improve market 
efficiencies by helping consumers make informed choices and the 
disclosure of price information clearly and directly advances this 
interest. The brief disclosure at the end of a prescription drug 
advertisement is narrowly tailored to achieve that result and does so 
more effectively than alternatives that do not provide the information 
in the advertisement itself.
2. Application of the Zauderer Test
    Comment: Some comments assert that the Zauderer test applies only 
where the government interest relates to preventing consumer deception. 
In contrast, at least one comment noted that some lower court cases 
have recognized other interests. Another comment stated that the United 
States Supreme Court has not resolved the issue.
    Response: The latter comments more accurately summarize the current 
state of the law. While some lower court decisions could be read to 
limit the application of Zauderer to matters where the government 
interest relates to preventing consumer deception, e.g., Entm't 
Software Ass'n v. Blagojevich, 469 F.3d 641, 651-53 (7th Cir. 2006), 
other courts have held that Zauderer applies where other interests 
support the compelled speech. See, e.g., Am. Bev. Ass'n v. City & Cty. 
of San Francisco, 916 F.3d 749, 755-56 (9th Cir. 2019) (en banc); Am. 
Meat Inst. v. United States Dep't of Agric., 760 F.3d 18 (D.C. Cir. 
2014) (en banc). The Supreme Court did not reach this issue in NIFLA. 
See 138 S. Ct. at 2377. It is our view, based on current law, that the 
Zauderer test is not limited to disclosures designed to prevent 
consumer deception.
    Comment: Several comments assert that the Zauderer test applies 
only to mandated disclosure of ``purely factual and uncontroversial'' 
information, but that the WAC, even if a literally true, should not be 
considered factual and uncontroversial because many patients would pay 
less, and therefore the WAC is incomplete, misleading, and will be 
misunderstood. Other comments argued that the disclosed prices ``for a 
typical 30-day regimen or for a typical course of treatment'' will 
often be inaccurate for certain drugs, where the course of treatment 
varies based on patient-specific factors such as age, weight, or 
baseline test results. Some comments further assert that by misleading 
patients, the compelled disclosure of inflated prices could dissuade 
patients from seeking appropriate treatment.
    Response: We disagree with these comments. The rule requires the 
disclosure of ``the current list price for a typical 30-day regimen or 
for a typical course of treatment.'' The current list price for a 
prescription drug or biological product is an objective fact. As 
discussed above, the WAC is a manufacturer-specified metric that is 
commonly used, reported in compendia, defined in statute, and relevant 
to both federal and commercial health care programs.
    As discussed in the proposed rule, price disclosure requirements 
are commonplace under federal, state, and local laws, and have been 
upheld when challenged under the First Amendment as permissible 
disclosures of factual and uncontroversial information. See, e.g., 
Spirit Airlines, Inc. v. United States Dep't of Transp., 687 F.3d 403, 
414 (D.C. Cir. 2012); Poughkeepsie Supermarket Corp. v. Dutchess Cnty, 
648 Fed. Appx. 156, 157-158, 2016 U.S. App. LEXIS 8770 (2d Cir. 2016); 
see also Beeman, 58 Cal. 4th at 341, 315 P.3d at 78, 165 Cal. Rptr. 3d 
at 809 (upholding compelled disclosure of pharmacy fees under the right 
to free speech guaranteed by article I of the California Constitution, 
which is ``at least as broad as and in some ways is broader than the 
comparable provision of the federal Constitution's First Amendment'') 
(citations and internal punctuation omitted). The ``disclos[ure of] 
objective facts and statistics'' about price information ``is simply 
not the same as forcing a speaker to support or accommodate an idea, 
belief, or opinion.'' Beeman, 58 Cal. 4th at 349, 315 P.3d at 84, 165 
Cal. Rptr. 3d at 816 (citations and internal punctuation omitted). And 
as the Supreme Court confirmed in NIFLA, ``we do not question the 
legality of . . . purely factual and uncontroversial disclosures about 
commercial products.'' 138 S. Ct. at 2376.
    The rule further requires the disclosure to contain the following 
statement: ``If you have health insurance that covers drugs, your cost 
may be different.'' Again, this is undeniably a truthful statement of 
objective fact. Moreover, it directly addresses the issue raised in 
some of the comments in that it contextualizes the list price 
information. The assertions in the comments that consumers will 
misunderstand the price disclosure with this additional context are 
purely speculative. In addition, nothing in the rule would prevent the 
manufacturer from presenting additional contextual information, should 
the manufacturer wish to do so. However, we remind manufacturers that 
they have to comply with all applicable FDA requirements and that 
nothing in this rule is intended to supersede any FDA requirement.
    Comment: At least one comment asserts that disclosure of the WAC is 
controversial because pharmaceutical pricing is a controversial topic, 
and therefore even if the Zauderer test for permissible compelled 
disclosures did apply, it would not be satisfied here. The comment 
cites NIFLA and Nat'l Ass'n of Mfrs. v. SEC, 800 F.3d 518 (D.C. Cir. 
2015) as support for this proposition.
    Response: We disagree with this comment and the applicability of 
the cited cases. First, because the WAC is a truthful statement of 
objective fact that is not subject to dispute, it is 
``uncontroversial.'' Indeed, all drug manufacturers provide this 
information voluntarily to companies who publish this information in 
compendia or databases available to the public, and we note that one 
drug manufacturer

[[Page 20745]]

voluntarily chose to include the list price of their more commonly 
prescribed drug prior to the establishment of a legal requirement to do 
so. Second, under the case law, it is not clear that 
``uncontroversial'' or ``noncontroversial'' is a legal standard that is 
part of the Zauderer test. See Disc. Tobacco City & Lottery, Inc. v. 
United States, 674 F.3d 509, 559 n.8 (6th Cir. 2012) (The test under 
Zauderer is ``factual'' and ``accurate''; the Court in Zauderer used 
the term ``noncontroversial'' once to ``merely describe[ ] the 
disclosure the Court faced in that specific instance.''). Indeed, some 
cases have not mentioned ``uncontroversial'' or ``noncontroversial'' in 
the course of applying the Zauderer test. See, e.g., Milavetz, Gallop & 
Milavetz, P.A. v. United States, 559 U.S. 229 (2010); Spirit Airlines, 
Inc., 687 F.3d 403.
    In NIFLA, the Supreme Court held that the Zauderer test applies 
only to required disclosures about the speaker's own product or 
service, and therefore it did not apply to a disclosure about the 
availability of state-sponsored medical services (including, in that 
case, the potential provision of abortion services). See 138 S. Ct. at 
2372. Although the Court noted that abortion is ``anything but an 
`uncontroversial' topic,'' that statement does not appear to be the 
basis for its finding that Zauderer did not apply to the disclosure 
about state-sponsored services. See id. Here, by contrast, the 
disclosure required by the rule relates to the product being 
advertised, thus falling squarely within the traditional ambit of the 
Zauderer test.
    Unlike the 6th Circuit holding in Discount Tobacco, the D.C. 
Circuit held in Nat'l Ass'n of Mfrs that ``uncontroversial'' is part of 
the Zauderer test. However, the holding in that case underscores that a 
drug's list price is not ``controversial.'' At issue in that case was a 
requirement that companies report to the SEC and state on their website 
if any of their products ``have not been found to be DRC conflict 
free''--which the court described as ``a metaphor that conveys moral 
responsibility for the Congo war'' and ``compel[s] [a company] to 
confess blood on its hands.'' 800 F.3d at 530. A disclosure of the list 
price of a prescription drug or biological product is hardly 
comparable, and courts have upheld required disclosures similar to the 
one here. See, e.g., Spirit Airlines, Inc., 687 F.3d 403 (upholding 
requirement for airlines to make total price the most prominent cost 
figure in advertisements); N.Y. State Rest. Ass'n v. N.Y. City Bd. of 
Health, 556 F.3d 114, 134 (2d Cir. 2009) (upholding required posting of 
calories on menus in chain restaurants); Nat'l Elec. Mfrs. Ass'n v. 
Sorrell, 272 F.3d 104 (2d Cir. 2001) (upholding requirement that 
mercury-containing products be labeled with a statement that the 
products contain mercury and, on disposal, should be recycled or 
disposed of as hazardous waste). Thus, even if ``uncontroversial'' is 
part of the Zauderer test and given the meaning adopted by the court in 
Nat'l Ass'n of Mfrs, the disclosure of price information is 
uncontroversial.
    Comment: Some comments assert that the required disclosures are not 
adequately justified. Some state that the government goal of 
encouraging the selection of cost-effective therapies cannot justify 
the compelled disclosure of the WAC, because the WAC is not the kind of 
health care economic information that would facilitate informed price-
shopping and providing pricing in advertisements is too disconnected 
from purchasing decisions, which are often made during physician-
patient discussions. Other commenters claimed that CMS assumed, without 
sufficient evidence, that higher drug costs result from a lack of 
transparency about drug prices, and that CMS failed to explain why the 
disclosure of the WAC would be effective in light of the distortions in 
the market created by third-party payors. Commenters also stated the 
rule would fail to advance the government's interests because it would 
simply result in manufacturers shifting advertisements from TV to other 
forms, such as online or through social media. One comment asserts that 
the required disclosure is unnecessary because many prescription drug 
manufacturers will begin voluntarily providing this pricing information 
on their websites pursuant to a document issued by the Pharmaceutical 
Researchers and Manufacturers of American (``PhRMA''), entitled PhRMA 
Guiding Principles-Direct to Consumer Advertisements About Prescription 
Medicines. That document was revised in October 2018 to include a new 
price disclosure principle recommending that prescription drug 
broadcast advertisements include direction to where patients can find 
information about the cost of the medicine, such as a company-developed 
website.
    Response: We disagree with these comments--the rule is more than 
adequately justified. The Zauderer test requires that compelled 
disclosures ``remedy a harm that is potentially real [and] not purely 
hypothetical.'' NIFLA, 138 S. Ct. at 2377 (citation and internal 
punctuation omitted). Here, the harm is clearly real. As discussed in 
section I.C. above, rising drug prices increase federal health care 
costs, threatening the sustainability of federal health care programs 
and the availability to care to Medicare and Medicaid beneficiaries, 
and are a harm to beneficiaries by increasing their health care and OOP 
costs.
    PhRMA's issuance of a new guiding principle in October 2018 does 
not change the need for the rule. The PhRMA principles are voluntary; 
they are not binding on PhRMA members, let alone non-members, and there 
is nothing to prevent PhRMA from revising its principles at any time, a 
fact which is underscored by the timing of the issuance of the 
guideline to coincide with the issuance of the proposed rule. Moreover, 
including direction to where price information can be found will not 
have the same impact as including the information in the advertisement 
itself. As noted in section II.E.7. of this rule, one third of adults 
surveyed stated that they do not frequently use the internet, making 
the PhRMA proposal relatively meaningless to that cohort. As to the 
other two thirds who do, the PhRMA proposal would require them to 
immediately open their browser, navigate to the URL flashed on the 
television screen, and then click through to find the pricing 
information. We believe that relatively few viewers will make use of 
the approach advocated by the PhRMA proposal, even assuming that its 
members implement the proposal.
    Comment: Some comments assert that the rule would be unduly 
burdensome in that it would clutter the advertisement and would require 
monthly updates.
    Response: We disagree. ``[C]ompliance with most compelled 
disclosure laws will logically entail some expense.'' Poughkeepsie 
Supermarket Corp. v. Cnty. of Dutchess, 140 F. Supp. 3d 309, 317 
(S.D.N.Y. 2015), aff'd 648 Fed. Appx. 156, 157-158, 2016 U.S. App. 
LEXIS 8770 (2d Cir. 2016). Courts, however, have not found them to be 
unduly burdensome unless they ``drown[ ] out the [speaker's] own 
message'' or ``effectively rule[ ] out'' a mode of communication. 
NIFLA, 138 S. Ct. at 2378. As we explained in the proposed rule, the 
requirement to add certain information to an advertisement is not 
unduly burdensome where, as here, the manufacturer has the ability to 
convey other information of its choosing in the remainder of the 
advertisement. See, e.g., Spirit Airlines, Inc., 687 F.3d at 414 
(requirement for airlines to make total price the most prominent cost 
figure does not significantly burdens

[[Page 20746]]

airlines' ability to advertise); Discount Tobacco City & Lottery, Inc. 
v. United States, 674 F.3d 509, 524 (6th Cir. 2012) (size of required 
warnings is not unduly burdensome where remaining portions of their 
packaging are available for other information). The inclusion of a 
brief textual statement at the end of a broadcast advertisement neither 
drowns out the speaker's message nor rules out broadcast advertisements 
as a mode of communication.
    Even if economic burden were relevant under Zauderer, the burden 
here is minimal. First, most manufacturers report the WAC to compendia 
and databases for other business purposes. Second, we are narrowly 
limiting the amount of information included on the advertisements and 
the advertisements subject to this policy to minimize the burden on 
manufacturers and advertising platforms to only deliver the minimum 
amount of necessary information to implement the policy. Finally, the 
fact that one pharmaceutical manufacturer is voluntarily including list 
prices in its television advertisements shows that including these 
prices is a minimal burden to the manufacturers.\37\ Finally, the 
Regulatory Impact Analysis in section IV shows that the cost to 
implement this change would cost less than 0.1 percent of what 
manufacturers spend on DTC television advertising.
---------------------------------------------------------------------------

    \37\ Johnson and Johnson. What Cost Information Helps Patients 
in a TV Ad? We Asked Them. https://www.jnj.com/our-company/what-cost-information-helps-patients-most-we-asked-them.
---------------------------------------------------------------------------

    Comment: Some comments assert that the rule will be burdensome on 
other actors in the chain of distribution such as broadcasters and 
cable operators, particularly in that the disclosure requirement will 
have the effect of diverting the advertising revenue to different 
media.
    Response: Spending on DTC pharmaceutical commercials increased 62 
percent between 2012 and 2017.\38\ Studies estimate that every dollar 
spent on DTC advertising increases sales on the advertised drug by 
$2.20-$4.20.\39\ Because of the value and return on investment related 
to DTC advertising,\40\ it is unlikely that adding the list price of 
pharmaceuticals to DTC television advertising will significantly affect 
the amount spent by that sector on television advertisements (i.e., 
$4.2 billion in 2017).
---------------------------------------------------------------------------

    \38\ Kantar Media. Pharma ups the ante on DTC advertising. 
https://www.kantarmedia.com/us/newsroom/km-inthenews/pharma-ups-the-ante-on-dtc-advertising.
    \39\ Ventola CL. Direct-to-Consumer Pharmaceutical Advertising: 
Therapeutic or Toxic? P T. 2011 Oct; 36(10): 669-674, 681-684.
    \40\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'')
---------------------------------------------------------------------------

    In addition, we disagree that this type of alleged impact is 
properly part of the First Amendment analysis. The undue burden that 
the Zauderer test contemplates is an undue burden on ``protected 
speech,'' not the economic impact on other actors. See NIFLA, 138 S. 
Ct. at 2377.
    Comment: Some comments assert that government-scripted speech is 
always burdensome.
    Response: We disagree. There are many products and services 
regulated under federal, state, and local laws for which disclosures 
are required. See Reed v. Town of Gilbert, 135 S. Ct. 2218, 2234-35 
(2015) (Breyer, J., concurring); Beeman, 58 Cal. 4th at 366-67, 315 
P.3d at 96-97, 165 Cal. Rptr. 3d at 830-31. And the Court in NIFLA 
confirmed that ``we do not question the legality of health and safety 
warnings long considered permissible, or purely factual and 
uncontroversial disclosures about commercial products.'' 138 S. Ct. at 
2376. Thus, the fact that many of these disclosures are ``government-
scripted'' does not make them unconstitutional.
    Moreover, disclosure of price information is fundamentally 
different from the viewpoint discrimination that lies at the heart of 
First Amendment protections. ``Required disclosure of accurate, factual 
commercial information presents little risk that the state is forcing 
speakers to adopt disagreeable state-sanctioned positions, suppressing 
dissent, confounding the speaker's attempts to participate in self-
governance, or interfering with an individual's right to define and 
express his or her own personality.'' Nat'l Elec. Mfrs. Ass'n v. 
Sorrell, 272 F.3d 104, 114 (2d Cir. 2001).
    The disclosure required by the rule is:
    The list price for a [30-day supply of] [typical course of 
treatment with] [name of prescription drug or biological product] is 
[insert list price]. If you have health insurance that covers drugs, 
your cost may be different.
    The bracketed language will be drafted by the company and the list 
price will be incorporated by the company. The few remaining words that 
constitute ``scripted'' language do not unduly burden First Amendment 
values.
    Accordingly, we conclude that this final rule is constitutionally 
proper under the Zauderer test.
3. Application of the Central Hudson Test
    Comment: Most comments did not dispute that the government 
interests described in the preamble to the proposed rule are 
substantial. Some comments affirmatively assert that HHS has a 
substantial interest in reducing Medicare and Medicaid costs. One 
comment, however, asserts that the proposed rule failed to establish 
that HHS's interest in the efficient administration of both Medicare 
and Medicaid programs was substantial.
    Response: We agree with the comments that affirm the substantial 
government interest in reducing prescription drug or biological product 
costs generally, as well as the costs borne by Medicare and Medicaid. 
As discussed in section I.C.2.a. above, DTC advertising increases both 
utilization and costs of pharmaceuticals. Because DTC advertising has a 
direct impact on the utilization of prescription drugs or biological 
products, and the drugs most frequently advertised on television are 
high-cost drugs, the link between DTC advertising and efficient 
administration of the Medicare and Medicaid program is clear. In our 
view, there is no question that this interest is substantial.
    Comment: Some comments assert that the rule will not advance any 
substantial government interests. Some of these comments assert that 
disclosure of the list price to consumers would not be helpful to 
consumers because of the disparity between the list price and the price 
actually paid by most patients.
    Response: We disagree. As discussed in section I.C.1., there is a 
substantial government interested in reducing list prices because list 
price is directly linked to a number of factors that directly tie to 
how much Medicare Part D patients will pay for their drugs. Increased 
spending on high-cost drugs harms CMS programs and CMS beneficiaries. 
Additionally, as discussed in Section II.C., the WAC is a good price 
metric to use to represent list price.
    Comment: Some comments assert that disclosure of the list price 
will not reduce drug prices. Other comments assert that the record is 
not sufficient to support the conclusion that the rule will be 
effective and that further study is necessary. At least one comment 
asserts that the rule will directly advance the government interest in 
reducing the high cost of prescription drugs or biological products 
including reducing Medicare and Medicaid costs.
    Response: We agree with the latter comment. As discussed in section 
I.C., it is well accepted that price transparency helps improve market

[[Page 20747]]

efficiencies by helping consumers make informed choices. Disclosure of 
price information clearly and directly advances this interest. Cf. 
Spirit Airlines, Inc., 687 F.3d at 415. Including the price of 
pharmaceuticals in DTC consumer advertising does change patient 
behavior, as discussed in section I.C. above. At the same time, any 
potential risks of being a barrier to access can be mitigated by 
notifying patients that the price may not reflect what the patient will 
pay OOP. Instead, it will create an opportunity for conversation 
between the patient and provider.\41\
---------------------------------------------------------------------------

    \41\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'')
---------------------------------------------------------------------------

    Comment: At least one comment asserts that the rule could cause 
companies to withdraw their television advertisements in favor of other 
media.
    Response: We find this scenario highly unlikely. As discussed, 
above, the heath care and pharmaceutical industry spent over $4.2 
billion on DTC advertising in 2017,\42\ up to a 4 fold increase in 
spending on the advertised drug for every dollar spent on DTC.\43\ 
Given the popularity of TV among potential purchasers of a 
manufacturer's drugs as discussed in Section II.A, we have no basis to 
conclude that manufacturers would stop advertising on TV in favor of 
other media.
---------------------------------------------------------------------------

    \42\ Kantar Media. Pharma ups the ante on DTC advertising. 
https://www.kantarmedia.com/us/newsroom/km-inthenews/pharma-ups-the-ante-on-dtc-advertising.
    \43\ Ventola CL. Direct-to-Consumer Pharmaceutical Advertising: 
Therapeutic or Toxic? P T. 2011 Oct; 36(10): 669-674, 681-684.
---------------------------------------------------------------------------

    Comment: Some comments assert that the rule is not appropriately 
tailored to advance the government interests. At least one comment 
asserts that it is underinclusive in that the media is limited to 
television advertisements and drug products are limited to those 
reimbursed by Medicare and Medicaid. The comment also opined that rule 
is overinclusive in that it would cover drugs for which there is no 
alternative.
    Response: We disagree with these comments. The Central Hudson 
standard does not require the government to employ ``the least 
restrictive means'' of regulation or to achieve a perfect fit between 
means and ends. Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 556 
(2001). Instead, it is sufficient that the government achieve a 
``reasonable'' fit by adopting regulations ``in proportion to the 
interest served.'' Bd. of Trustees v. Fox, 492 U.S. 469, 480 (1989) 
(citation omitted). As long as the regulation is ``[w]ithin those 
bounds'' of reasonable fit and proportion, the agency may determine 
``what manner of regulation may best be employed.'' Id. The final rule 
starts with television advertising because we want to define the rule 
as narrowly as possible to achieve the goal improving price 
transparency and reducing the costs of prescription drugs and 
biological products. Since DTC television advertising makes up the 
majority of DTC spending, this is a good place to start to have the 
largest impact with the smallest burden. We reserve the right to expand 
the rule to include other media formats through future rulemaking.
    As discussed above, the rule targets television advertisements for 
drugs because television advertising makes up the largest portion of 
DTC spend and has an outsized impact compared to other forms. As we try 
to educate as many patients as possible with this valuable information, 
as manufacturers do with their advertisements, we want to focus on the 
most commonly used and broadest reaching medium. This will allow us to 
maximize the number of patients educated while minimizing burden on 
manufacturers. The scope is limited to Medicare and Medicaid because we 
can directly link the lack of information and transparency on drug 
pricing to harm to those programs and their beneficiaries.
    We disagree with the concern that providing the price for drugs or 
biological products that have no alternatives is overinclusive. As 
discussed above, the purpose of this rule is to provide valuable 
information about the drugs and biological products to the patient 
facilitate conversations and shared decision-making with their 
providers. The purpose is not to deter patients from using high cost 
prescription drugs and biological products. In the case of drugs and 
biologic products that have no alternative, the price will still be an 
informative talking point.
    Comment: Some comments assert that the preamble to the proposed 
rule incorrectly cited Red Lion Broad. Co. v. FCC, 395 U.S. 367, 390 
(1969) because the ``fairness doctrine'' at issue in that case is 
inapplicable here.
    Response: We agree that the fairness doctrine is inapplicable to 
this rule. The preamble to the proposed rule cited Red Lion 
Broadcasting for the much more limited proposition that the Supreme 
Court has recognized that broadcast advertisements can be a 
particularly powerful means for conveying information to listeners.
    Comment: Some comments assert that there are better alternatives 
that would be less burdensome on speech. Some comments assert that HHS 
should encourage companies to institute voluntary price disclosure 
measures, which the comments assert are preferable to compelled speech. 
At least one comment disagrees and asserts that, since corporations owe 
duties to their shareholders, not to the public, they should not be 
allowed to self-regulate.
    Response: Since the issuance of the proposed rule, some 
manufacturers have made more pricing information, including list price, 
available on websites, and one manufacturer has begun to disclose list 
price information in some of its television advertisements. While we 
applaud these measures, we have concluded that voluntary measures will 
be insufficient to ensure the continued commitment of all of the 
relevant companies. We address the issue of manufacturer websites 
further below in section II.E.7.
4. Heightened and Strict Scrutiny
    Comment: Some comments suggest that content-based compelled speech 
and speaker-based regulation should be subject to strict scrutiny or at 
least heightened scrutiny, citing Reed v. Town of Gilbert, 135 S. Ct. 
2218, 2226 (2015), Sorrell v. IMS Health Inc., 564 U.S. 552 (2011), and 
NIFLA.
    Response: We disagree with these comments. As discussed above, HHS 
believes that this rule is properly reviewed under Zauderer. In Reed v. 
Town of Gilbert, the Court applied strict scrutiny to content-based 
restrictions on non-commercial speech in public fora. In that opinion, 
the Court stated that, ``[c]ontent-based laws--those that target speech 
based on its communicative content--are presumptively unconstitutional 
and may be justified only if the government proves that they are 
narrowly tailored to serve compelling state interests.'' 135 S. Ct. at 
2226. However, as Justice Breyer explained in his concurring opinion, 
many regulatory programs ``inevitably involve content discrimination''; 
applying strict scrutiny to those programs would ``write a recipe for 
judicial management of ordinary government regulatory activity.'' Id. 
at 2234-35 (Breyer, J., concurring). Lower courts have subsequently 
held that Town of Gilbert does not apply to the regulation of 
commercial speech. See, e.g., Sarver v. Chartier, 813 F.3d 891, 903 n.5 
(9th Cir. 2016). And the Supreme Court has not applied strict scrutiny 
to the content-based regulations in decisions issued after Town of 
Gilbert, namely Matal v. Tam, 137 S. Ct. 1744 (2017), Expressions Hair 
Design v. Schneiderman, 137 S. Ct. 1144, 1151 (2017), and NIFLA itself.

[[Page 20748]]

    The Supreme Court in Sorrell suggests that content- and speaker-
based restrictions would be subject to ``heightened scrutiny,'' but 
nevertheless continued to apply the ``commercial speech inquiry'' as 
outlined in Central Hudson. Sorrell v. IMS Health Inc., 564 U.S. 552, 
571-72 (2011). That led to debate in the lower courts about whether 
heightened scrutiny is a different standard from Central Hudson and, if 
so, what the test is and when it is applied. See, e.g. Retail Digital 
Network, LLC v. Prieto, 861 F.3d 839 (9th Cir. 2017) (en banc) 
(``Sorrell did not mark a fundamental departure from Central Hudson's 
four-factor test, and Central Hudson continues to apply.''); 
Wollschlaeger v. Florida, 848 F.3d 1293 (11th Cir. 2017) (en banc) 
(applying ``heightened scrutiny'' to a content-based restrictions); 1-
800-411-Pain Referral Service, LLC v. Otto, 744 F.3d 1045, 1055 (8th 
Cir. 2014) (Because Sorrell did not define heightened scrutiny, Central 
Hudson applies to restrictions on commercial speech that are content- 
or speaker-based). Thus, the legacy of Sorrell remains unclear.
    In addition, there have been suggestions that heightened scrutiny 
should be connected to viewpoint discrimination, and not more broadly 
to content-based regulation. See Sorrell, 564 U.S. at 565 (law under 
review ``goes even beyond mere content discrimination, to actual 
viewpoint discrimination''); Matal, 137 S. Ct. at 1767 (Kennedy, J., 
concurring) (``the viewpoint based discrimination at issue here 
necessarily invokes heightened scrutiny''). This distinction may be 
particularly important given that many regulatory programs necessarily 
involve both content- and speaker-based restrictions. See Sorrell, 564 
U.S. at 589 (Breyer, J., dissenting) (``Regulatory programs necessarily 
draw distinctions on the basis of content. . . . Nor, in the context of 
a regulatory program, is it unusual for particular rules to be 
`speaker-based,' affecting only a class of entities, namely, the 
regulated firms.'').
    While the First Amendment jurisprudence continues to evolve, one 
thing is clear--the disclosure required by this rule does not implicate 
the concerns underlying Sorrell and many other cases--that is, the 
government's ``regulation of speech because of disagreement with the 
message it conveys.'' Sorrell, 564 U.S. at 566. Here, the rule requires 
merely the disclosure of price information regarding prescription drugs 
or biological products in television advertisements--objective, factual 
information that will help inform consumers and improve market 
efficiencies.

E. Requirements in DTC Advertising Other Than WAC

1. Medium To Include List Price
    We sought comment on whether we should apply the proposed 
regulation to other media formats and, if so, what the presentation 
requirements should be.
    Comment: Some commenters recommended that list price be included on 
all DTC advertising, such as radio, magazine, and online communication. 
Some commenters asked CMS to explain why this rule only applies to DTC 
advertisements on television. Including the prices on all media formats 
would support the goal of this rule in increasing transparency and 
informing patients. Several commenters recommend providing the list 
price to the patient and provider at the time of prescribing, which 
would require expanding beyond just television advertising, because 
this is when the provider and patient would best be able to use the 
information when making care decisions.
    Response: We appreciate recommendations to include the list price 
on all forms of DTC advertising. We intend to only apply this rule to 
television advertising because we want to apply this rule as narrowly 
as possible to achieve our goal of promoting price transparency and 
reducing drug costs, with minimal burden on those providing the 
information. We appreciate commenters' recommendations to make the list 
price available at the time of prescribing. In our recent proposed rule 
titled ``Modernizing Part D and Medicare Advantage to Lower Drug Prices 
and Reduce Out-of-Pocket Expenses,'' 83 FR 62152 (November 30, 2018), 
we proposed to require Part D sponsors to implement an electronic real-
time benefit tool (RTBT) capable of integrating with at least one 
prescriber's e-prescribing and electronic medical system to provide 
complete, accurate, timely and clinically appropriate patient-specific 
real-time formulary and benefit information, including cost, formulary 
alternatives, and utilization management requirements.
2. Typical Regimen--30 Days or Course of Treatment
    We sought comment on whether 30-day supply and typical course of 
treatment are appropriate metrics for a consumer to gauge the cost of 
the drug.
    Comment: Many commenters agreed that 30 days is an appropriate 
quantity for the purposes of providing a usable list price in a 
television ad, especially for chronic medications. One commenter 
suggested providing the cost for a 90-day supply because many payors 
prefer that patients fill their prescriptions for a 90-day supply. Some 
comments, including those that support using a 30-day supply, recommend 
including the annual cost instead of, or in addition to, the cost for 
30-day supply.
    Many commenters also agreed that the price for a typical course of 
treatment would be appropriate for drugs that are not taken chronically 
or do not have standard 30-day supply. Commenters note that it is 
important for CMS to provide specific guidance on the definition of a 
typical course of treatment, as this could be an opportunity for gaming 
to provide the cost for the minimum possible treatment.
    Some commenters note that it is difficult for manufacturers to 
calculate a WAC or list price for a 30-day supply or a typical course 
of treatment because doses can vary dramatically for individual 
patients based on characteristics such as weight, gender, 
pharmacogenomics, renal and liver function, or severity of disease.
    Response: We appreciate commenters' feedback. We are finalizing the 
requirement as proposed. While we understand that including the WAC for 
a 90-day supply or the annual cost may be useful for some patients, we 
believe that our requirement to include the WAC of a 30-day supply will 
provide sufficient information for patients to assess their costs on a 
monthly, or even a 90-day or other basis without being burdensome to 
manufacturers. In addition, we understand that payors generally cover 
chronic medication in monthly increments, which makes the 30-day price 
most relevant. In response to comments seeking further guidance on what 
constitutes a typical course of treatment, we decline to impose 
specific requirements for determining the typical course of treatment 
at this time. The manufacturers will be in the best position to 
determine what a typical course of treatment would be for their drugs, 
and therefore will be in the best position to determine the appropriate 
list price for a typical course of treatment, consistent with the 
disclosure requirement set forth at Sec.  403.1202. We will monitor 
compliance and take appropriate action if warranted.
3. Other Information
    We also sought comment on the content of the proposed pricing 
information statement as described herein, including whether other 
specifications should be incorporated.

[[Page 20749]]

    Comment: Some commenters agreed with the general disclosure, ``If 
you have health insurance that covers your drug, your cost may be 
different'' because, while it does not provide the specifics of how 
different the OOP cost may be from the list price, it provides enough 
information for the patient to expect a different price based on his or 
her insurance. Other commenters believe that this is not enough of a 
stipulation, and that patients need additional context for the 
information to be meaningful.
    Response: We appreciate commenters' support for the general 
disclosure about OOP costs. Although a general statement might not 
provide detailed information about each patient's OOP cost or address 
the potential confusion between list price and OOP cost for a patient, 
we believe it is sufficient because, as noted in section II.C.2., DTC 
advertising is a source of information for patients from which to start 
a conversation patient and provider or payor. This rule encourages such 
conversations by promoting price transparency without unduly burdening 
manufacturers. We therefore decline to require a more specific 
disclosure about a patient's OOP costs.
    Comment: A few commenters recommended that CMS not expand the 
proposed disclaimer in such a way as to allow manufacturers to state 
the price of a drug after the consideration of a coupon or discount. 
Commenters noted that this would allow manufacturers to mask the true 
cost of their drugs.
    Response: We are finalizing the standard disclaimer as proposed. We 
also note that this rule requires the inclusion in DTC television 
advertisements of the drug's WAC, which we have defined--consistent 
with section 1847A of the Social Security Act--to exclude prompt pay or 
other discounts. Thus, the pricing information that must be disclosed 
will not be obscured by the application of coupons or discounts.
4. Combination of Drugs
    We sought comment on how to treat an advertised drug that must be 
used in combination with another non-advertised drug or device.
    Comment: A few commenters recommended that, in the cases of drugs 
that are typically used in combination with other drugs, DTC television 
advertisements include a standardized statement, such as ``Note: this 
drug may require use in combination with another drug or device, whose 
price is not reflected in this cost.'' These commenters also 
recommended against trying to estimate or include costs associated with 
the other drugs that are typically included in combination.
    Response: We appreciate commenters' recommendations to include a 
standardized statement alerting patients to the fact that this drug is 
often used in combination with other drugs. Although we decline to 
require inclusion of such a statement at this time, we encourage 
manufacturers of drugs typically used in combination with other drugs 
to include such a statement in their DTC television advertisements. We 
similarly decline to require that such a statement, if included in a 
DTC television advertisements, estimate or reflect costs associated 
with the other drugs, as we agree that may be confusing for patients.
5. Placement of Information/Content of the Statement (Including Use of 
Competitors' Prices)
    We sought comment on whether the final rule should include more 
specific requirements with respect to the textual statement, such as 
specific text size, contrast requirements, and/or duration and 
specifically what those requirements should be.
    Comment: Many commenters recommend that the information is 
displayed clearly in a way that is easy to see and easy for the average 
reader to read. Some commenters recommend that CMS specify requirements 
on font, size, location, and duration because without a clear, 
readable, and understandable standard format, manufacturers may 
intentionally make the information difficult to read or understand. 
Commenters also recommend reading the list price as part of the audio 
in addition to printing the price on the ad to further make the 
information available.
    Other commenters recommended against specific requirements on how 
to display the list price in the ad because advertisements are 
extremely limited in time and space and recommended flexibility in 
order to develop an understanding of the best way to display this 
information. These commenters recommend that manufacturers be able to 
test different methods and details for displaying the information to 
best educate patients.
    Response: We appreciate these comments. We will finalize Sec.  
403.1203 as proposed because we believe it provides a sufficiently 
detailed standard for how the information must be conveyed in the 
advertisement, while still allowing manufacturers flexibility to 
develop a format that--consistent with the regulatory standard--best 
conveys the required information. We will monitor compliance with the 
regulation and provide guidance as necessary. We also will consider 
adopting more detailed requirements through future rulemaking if 
warranted.
    Comment: Two commenters recommended against allowing manufacturers 
to include an up-to-date competitor product's list price because they 
believe that manufacturers will always list the highest competitor 
price available, which may confuse patients if other cheaper 
alternatives are available. Other commenters support the option to 
provide the list price of a therapeutic competitor, because the list 
price is not useful to the patient without additional context.
    Response: We appreciate these comments. Although we recognize 
commenters' concerns about gaming, we are finalizing this provision as 
proposed. Allowing manufacturers to provide an up-to-date competitor 
product's price, so long as they do it in a truthful and non-misleading 
way, will provide additional information that the patient can use to 
manage his or her care. We believe that providing information about the 
prices of therapeutic alternatives provides valuable context for the 
patient. However, we remind manufacturers that they have to comply with 
all applicable FDA requirements and that nothing in this rule is 
intended to supersede any FDA requirement.
6. Effective Dates of Price
    We proposed to require that the list price be current as determined 
on the first day of the quarter during which the advertisement is being 
aired or otherwise broadcast. We sought comment as to whether a 
statement expressing an expiration date of the current price reflected 
in the advertisement should be incorporated into the required 
disclosure language so that consumers are informed that drug prices are 
subject to frequent changes and a drug price may differ from the date 
the advertisement is broadcast to the date that the drug is dispensed.
    Comment: Many commenters recommended that DTC advertisements 
include a list price's expiration date to ensure that patients are 
acting on accurate information and to prevent manufacturers from 
intentionally providing misleading information. Commenters noted that, 
due to the frequency of prices changes, advertisements should specify 
the dates that the price is valid or when the price is expected to 
expire or change. Some commenters recommended specifying how timely the 
manufacturer must be in updating prices in the advertisements. A few 
commenters recommended that

[[Page 20750]]

CMS require that the price always be up-to-date when they appear in the 
advertisement. Finally, one commenter suggested that as an alternative 
to updating list prices, the advertisement could include the WAC over 
some look-back period to approximate what the current price may be.
    Response: We appreciate these comments and are finalizing Sec.  
403.1202 as proposed, with minor technical modifications described 
below, meaning that the list price must be current, as determined on 
the first day of the quarter during which the advertisement is being 
aired or broadcast. As we anticipate that manufacturers update their 
WACs twice per year, we do not believe advertisements will need to be 
changed with significant frequency. We decline to require inclusion of 
a price's expiration date in the advertisement because we want to 
minimize the burden on manufacturers and because we do not think that 
the information would helpful to patients beyond what is already 
required. However, a manufacturer may specify the effective dates of 
its prices, should it choose, so long as the price listed is current 
(as determined under Sec.  403.1202). As noted above, we are making 
technical changes to the regulation text at Sec.  403.1202 to refer 
consistently to a typical course of treatment and to remove the 
quotation marks that do not pertain to the required text.
7. Use of Manufacturer Websites
    Comment: Commenters suggested that in lieu of requiring the WAC in 
the advertisement, the government could require that advertisements 
include a reference to where price information can be found, such as a 
company website that would include the list price and other context 
about the potential cost of the medicine. Specifically, many commenters 
recommend the alternative of encouraging voluntary price reporting in 
DTC advertising, pursuant to the PhRMA Guiding Principles-Direct to 
Consumer Advertisements about Prescription Medicines. These guiding 
principles now recommend that prescription drug broadcast 
advertisements include direction to where patients can find information 
about the cost of the medicine, such as a company-developed website. 
Commenters note that this would provide the flexibility to include the 
most important information in a method that is most appropriate for 
patients. Commenters note that this approach would avoid some of the 
potential adverse consequences associated with the requirements of the 
final rule, and would meet the overall objectives of the policy of 
providing promoting price transparency for patients.
    Response: We appreciate the commenters' recommendation to promote a 
program of voluntarily listing drug prices. However, we disagree that 
voluntary price disclosure would adequately meet the goals of providing 
price transparency. If price disclosure were voluntary, some 
manufacturers would decline to provide the list price to the patient, 
and the patient would therefore lack that valuable information. For the 
reasons stated elsewhere in this rule, we believe it is necessary to 
the efficient administration of Medicare and Medicaid that this 
information be disclosed in DTC television advertisements. In contrast, 
referring patients to other resources, such as company-owned websites, 
would not serve this purpose. First, it is likely that there would be a 
very low conversion of patients going to a website that is referenced 
in a TV ad that they see when they are not at their computer. More 
importantly, as noted in section II.D., 33 percent of adults surveyed 
say they do not frequently use the internet; as to the other, requiring 
them to open a browser, navigate to a site they saw on television, and 
click through to find pricing information creates additional burden and 
uncertain outcomes. Thus, manufacturer websites are not an adequate 
alternative to the price disclosure requirement we are finalizing in 
this final rule.
8. Use of Plan Finder
    Comment: Some comments assert that CMS should develop its own 
database of list prices for the public to access.
    Response: We continue to believe that the Medicare Part D Plan 
Finder is a valuable tool for patients, and we will continue to improve 
the tool over time through efforts such as the eMedicare 
Initiative.\44\ We think the DTC television advertisement requirement 
provides additional information that is very useful to patients' 
understanding of drug pricing and provides important supplementary 
information to the Plan Finder tool.
---------------------------------------------------------------------------

    \44\ CMS News Room. CMS announces new streamlined user 
experience for Medicare beneficiaries. 2018 Oct 01. https://www.cms.gov/newsroom/press-releases/cms-announces-new-streamlined-user-experience-medicare-beneficiaries-0.
---------------------------------------------------------------------------

    Comment: Some comments stated that steps should be taken to 
encourage practitioners, plans, and payors to provide more information 
on prices and coverage.
    Response: We agree that it is important to encourage health care 
practitioners, health plans, and payors to provide more information 
about prices and coverage. Price transparency is an important aspect of 
Medicare's most recent payment rules. In a recent proposed rule titled 
``Modernizing Part D and Medicare Advantage to Lower Drug Prices and 
Reduce Out-of-Pocket Expenses,'' which appeared in the Federal Register 
on November 30, 2018 (83 FR 62152), we proposed to require Part D 
sponsors to adopt Real-Time Pharmacy Benefits Tools (RTBT) and enhanced 
Explanation of Benefits (EOB) forms to provide beneficiaries and their 
prescribers with more drug price information. We continue to encourage 
all patient-facing stakeholders in the drug supply chain to educate 
their patients and incorporate the cost of drugs and biological 
products into all of the shared-decision making conversations to 
identify the best overall therapy for the patient.

F. Other Approaches

    We also considered additional solutions to provide beneficiaries 
with relevant information about the costs of prescription drugs and 
biological products so they can make informed decisions that minimize 
not only their OOP costs but also expenditures borne by Medicare and 
Medicaid. We sought comment on whether the following approaches could 
support price transparency and informed decision making, either in 
addition to or in lieu of the measures proposed in this notice of 
proposed rulemaking: (1.) An enhanced CMS drug pricing dashboard, (2.) 
intelligent plan selection or use of intelligent assignment, and (3.) a 
new payment code for drug pricing counseling. We are also interested in 
other approaches to price transparency and informed decision making 
that we have not contemplated.
1. Enhanced Drug Pricing Dashboard
    Comment: Many commenters supported the development of a tool that 
could provide real-time information on drug costs, formulary, and cost-
sharing that is easily accessible to patients. Some commenters pointed 
to useful examples in the private sector. Other commenters noted that 
PBMs and payors already have this capability. One commenter suggested 
that an enhancement could be to highlight drugs with excessive price 
increases or high prices, and list lower cost alternatives. Other 
commenters expressed general skepticism that a dashboard would be a 
useful tool for patients. First, commenters noted that there are 
existing private tools, such as GoodRx, that provide similar 
information. Next, commenters noted

[[Page 20751]]

that dashboards, no matter how they are configured, are going to be 
complex and difficult for patients to use. While the information will 
be useful and interesting to researchers, it would likely provide 
limited value to patients.
    Response: We appreciate these recommendations and agree that online 
information is no substitute for pricing information in the DTC ad 
itself. As discussed in section II.E.8., we recently proposed to 
require Part D sponsors to adopt a real time benefit tool (RTBT) that 
would provide information about drug costs, formulary placement and 
cost-sharing. In addition, we also recently enhanced the Medicare and 
Medicaid Drug spending dashboards \45\ to identify the manufacturers of 
drugs with price increases and highlight year-over-year pricing 
information. We appreciate feedback sharing concern about the 
usefulness of the drug dashboard for patients. We will take this 
feedback into consideration as we continue to improve and enhance the 
drug dashboard.
---------------------------------------------------------------------------

    \45\ Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/.
---------------------------------------------------------------------------

2. Intelligent Plan Selection
    Comment: Some commenters generally supported the development of a 
tool to support intelligent plan selection that is voluntary for 
patients, and recommended it as a general improvement. One commenter 
was concerned that such a tool would be difficult to implement. One 
commenter expressed concern that intelligent plan selection could lead 
to adverse selection of patients and potential market instability.
    Response: We appreciate these recommendations and concerns. There 
are likely various operational issues that would need to be addressed 
as a threshold matter for such a tool to be feasible. If CMS were to 
pursue development of such a tool, we would need to consider and 
address such issues, as well as consider how to address commenters' 
concerns. We will continue to consider this concept.
3. Counseling Code
    In an effort to incentivize provider engagement with patients on 
their prescription drug and biological product OOP costs, CMS could 
create a new payment code, in a budget neutral manner, for doctors to 
dialogue with patients on the benefits of drugs and drug alternatives. 
This would likely decrease the number of prescriptions that go unfilled 
because of unexpected high OOP costs, thus improving adherence, but 
also could increase provider awareness of drug pricing which may 
influence prescribing when appropriate cheaper options are available.
    Comment: Some commenters recommend creating a new payment code for 
counseling on drug pricing to appropriately reimburse providers for the 
additional time that they will need to spend on discussing the cost of 
therapies for patients. One commenter supports creating a new code, but 
recommends that the code be broad enough to also reimburse providers 
for care planning and navigation, shared decision making, developing a 
plan of care, and fostering a care coordination process, which would 
include counseling patients on the potential costs of their drugs and 
biological products. A couple commenters that supported the creation of 
the new payment code recommended making this code available to 
pharmacists, who may be one of the best resources to provide this 
information to the patient. One commenter noted that providers will 
need real time access to cost data if they are expected to counsel 
patients on cost, so we should keep this in mind if we plan to create 
the code.
    Other commenters recommend against creating a new payment code. One 
commenter noted that providers are not necessarily the ones that should 
be having these conversations because they do not always have access to 
the relevant drug pricing information. Instead, they recommend that 
payors provide this information to patients. Another commenter noted 
that most providers already counsel their patients on their OOP costs 
and the importance of filling their prescription, so it is not 
necessary to create a separate code. Another commenter notes that 
current E&M documentation guidelines are broad enough to cover these 
conversations as part of the risk and benefits of treatment options. 
Finally, many commenters, including those that generally support 
creating a new billing code are concerned where the resources would 
come from based on the budget neutral element of the code.
    Response: We agree that services such as patient counseling, care 
planning and navigation, and shared decision making are valuable to 
patients and important for delivering high quality care. We also agree 
that pharmacists may be able to provide information on drug pricing and 
patient coinsurance to patients and advise patients on the availability 
of less expensive drugs in the event cost is a barrier to medication 
adherence. While we are not finalizing in this rule, we will consider a 
counseling code for future rulemaking in the appropriate benefit 
categories as allowed by statute.

G. Enforcement

    We proposed in Sec.  403.1204(a) that the Secretary will maintain a 
public list that will include the drugs and biological products 
identified by the Secretary to be advertised in violation of this rule. 
We expect that this information will be posted publicly on a CMS 
internet website no less than annually. No other HHS-specific 
enforcement mechanism was proposed. However, we anticipate that the 
primary enforcement mechanism will be the threat of private actions 
under the Lanham Act sec. 43(a), 15 U.S.C. 1125(a), for unfair 
competition in the form of false or misleading advertising. See, e.g., 
POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2234 (2014); In re 
McCormick & Co., Inc., Pepper Prod. Mktg. & Sales Practices Litig. 215 
F. Supp. 3d 51, 59 (D.D.C. 2016). Since Lanham Act cases normally 
involve sophisticated parties doing business in the same sector, the 
likelihood of meritless lawsuits is acceptably low. We sought comment 
on the primary enforcement mechanism and other approaches to enforcing 
compliance.
    Under principles of implied preemption, to the extent State law 
makes compliance with both Federal law and State law impossible or 
would frustrate Federal purposes and objectives, the State requirement 
would be preempted. See, e.g., Murphy v. NCAA, 138 S. Ct. 1461, 1480-81 
(2018); Mutual Pharm. Co. v. Bartlett, 570 U.S. 472, 480 (2013); Geier 
v. American Honda Motor Co., 529 U.S. 861, 872-86 (2000). Obstacle 
preemption is not limited to examining the accomplishment of certain 
objectives; the execution is relevant as well. Geier, 529 U.S. 881-82. 
A state law is therefore preempted ``if it interferes with the methods 
by which the federal statute was designed to reach that goal.'' Gade v. 
Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 103 (1992) (quoting Int'l 
Paper Co. v. Ouellette, 479 U.S. 481, 494 (1987)).
    Because this proposed rule is part of a broader initiative to 
reduce the price to consumers of prescription drugs and biological 
products, it would be counterproductive if this rule were to increase 
transactional costs in defending meritless litigation. We believe that 
the existing authority cited above, namely the Lanham Act, is the 
appropriate mechanism for enforcing against deceptive trade practices. 
Accordingly, consistent with our not proposing any HHS-specific 
enforcement mechanism, we proposed at Sec.  403.1204(b) that this

[[Page 20752]]

rule preempt any state-law-based claim that depends in whole or in part 
on any pricing statement required by this rule.
1. Lanham Act
    Comment: Several commenters were concerned that private actions 
under the Lanham Act would not be an adequate enforcement mechanism for 
the requirement that manufacturers include the current list price of a 
prescription drug or biological product in all DTC television 
advertisements. In particular, these commenters were concerned that 
standing to enforce this requirement would be limited to competitors, 
and that consumers, who have the greatest interest in receiving this 
pricing information, would be precluded from taking action against 
violators. A few commenters added that the high costs of pursuing an 
action under the Lanham Act would discourage companies from bringing 
claims, while one commenter expressed concern about the potential for 
higher drug costs due to drug manufacturers having to internalize the 
costs of Lanham Act litigation. Several commenters noted it would be 
difficult to prove a claim under the Lanham Act for false advertising 
solely on the basis of the omission of information regarding the list 
price of a prescription drug or biological product, which they assert 
differs from the price paid by most consumers. Some of these commenters 
also expressed concerns that a competitor would be unable to 
demonstrate commercial injury.
    Response: We disagree with the comments asserting that the threat 
of private actions under the Lanham Act for unfair competition in the 
form of false or misleading advertising is not an appropriate mechanism 
to enforce the price disclosure requirement in Sec.  403.1202. We 
acknowledge that standing to bring suit under the Lanham Act is limited 
to competitors and others that can allege an injury to a commercial 
interest, and consumers would not be able to challenge the omission of 
pricing information. See Lexmark Int'l, Inc. v. Static Control 
Components, Inc., 572 U.S. 118, 132 134 S.Ct. 1377, 1390 (2014). We 
considered this limitation when proposing to rely upon the Lanham Act 
as the primary enforcement mechanism for the requirements of this rule. 
We continue to believe that competitors are best positioned to identify 
and act upon advertisements that violate this regulation. Furthermore, 
although consumers lack standing to bring an action under the Lanham 
Act, we note that a fundamental premise of the rules in section 43(a) 
of the Lanham Act is the strong public interest in protecting consumers 
from false and misleading advertising. See Novartis Consumer Health, 
Inc. v. Johnson & Johnson-Merck Consumer Pharm., Co., 290 F.3d 578, 597 
(3d Cir. 2002) (``[T]here is a strong public interest in the prevention 
of misleading advertisements . . . .'') (citations omitted); Vidal 
Sassoon, Inc. v. Bristol Myers Co., 661 F.2d 272, 277 (2d Cir. 1981) 
(recognizing ``the clear purpose of Congress in protecting the 
consumer''). See also, Lillian R. BeVier, Competitor Suits for False 
Advertising Under Section 43(a) of the Lanham Act: A Puzzle in the Law 
of Deception, 78 Va. L. Rev. 1, 3 (1992) (``[T]he proper perspective 
from which to view the rules in section 43(a) cases is that of the 
potentially deceived consumer rather than the possibly injured 
competitor.''); Ross D. Petty, Competitor Suits Against False 
Advertising: Is Section 43(a) of the Lanham Act a Proconsumer Rule or 
an Anticompetitive Tool?, 20 U. Balt. L. Rev. 381, 395 (1991) (``Most 
courts recognize that there is a `strong public interest' in using the 
Lanham Act to prevent misleading advertising and presume that 
consumers' as well as competitors' interests are to be protected under 
the Act.'') (citations omitted).
    Although several commenters objected to our proposal to rely on 
Lanham Act actions by competitors to enforce the requirements of this 
rule on the grounds that such actions would be too costly, no 
commenters provided specific evidence that it would be prohibitively 
expensive to bring a Lanham Act suit. Indeed, if a competitor is able 
to establish a violation of section 43(a) of the Lanham Act, 15 U.S.C. 
1125(a), and demonstrates that it has been injured as a result of that 
violation, it may be entitled to recover not only its own damages, but 
also the defendant's profits and the costs of the action. See 15 U.S.C. 
1117(a). Furthermore, as we indicated in the proposed rule, because 
Lanham Act cases typically involve sophisticated parties doing business 
in the same sector, the likelihood of meritless lawsuits is acceptably 
low. As a result, the use of this enforcement mechanism is unlikely to 
force drug manufacturers to raise prices to account for the heavy costs 
of defending against meritless litigation.
    Nor do we agree with those commenters who believe it will be 
impossible to demonstrate competitive harm from the omission of the 
required pricing information from a drug manufacturer's advertising. As 
noted by the commenters, a successful suit under section 43(a) of the 
Lanham Act, requires a ``false or misleading description of fact, or 
false or misleading representation of fact.'' 15 U.S.C. 1125(a). 
However, it is also well-established that a statement can be actionable 
under section 43(a) if it is ``affirmatively misleading, partially 
incorrect, or untrue as a result of failure to disclose a material 
fact.'' See 5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair 
Competition sec. 27.65 (5th ed. 2018) (citations omitted) (emphasis 
added). Failure to disclose the list price in a DTC advertisement, if 
required to do so by Sec.  403.1202, makes that advertisement false and 
misleading. The disclosure requirements under Sec.  403.1202 apply to 
all prescription drugs and biological products distributed in the 
United States for which payment is available, directly or indirectly, 
under titles XVIII or XIX of the Social Security Act other than 
``excepted pharmaceuticals.'' Excepted pharmaceuticals are defined in 
Sec.  403.1200(b) as any prescription drug or biological product that 
has a list price less than $35 per month for a 30-day supply or typical 
course of treatment. These excepted pharmaceuticals are exempt from the 
requirement to disclose pricing information in their advertisements. As 
a result, when an advertisement does not include pricing information, 
it would be reasonable for a consumer to conclude that the prescription 
drug or biological product is an excepted pharmaceutical, with a list 
price of less than $35. Thus, the omission of pricing information from 
an advertisement for a higher cost pharmaceutical is inherently false 
and misleading.
    Finally, we disagree that it will be impossible for a competitor to 
show harm arising from the omission of information regarding the list 
price of a prescription drug or biological product from an 
advertisement. Commenters asserted this would be the case because the 
list price does not reflect the actual purchase price that will be paid 
by all consumers for all purchases. However, as discussed above, there 
is a direct link between the WAC and the price paid for the majority of 
patients, including any uninsured patients and patients with high-
deductible health plans, or co-insurance, including Part D. Disclosure 
of the list price substantially affected consumer interest in high-
priced drugs. In contrast, price disclosures had little influence on 
consumer interest in low-priced drugs.\46\ Thus, it is reasonable to 
believe that the omission of list price information for a particular 
prescription

[[Page 20753]]

drug or biological product, which would imply that the drug or biologic 
is in the low-priced category of excepted pharmaceuticals, could be 
material to a consumer's decision to choose that prescription drug or 
biological product, rather than a competing product that includes a 
higher list price in its advertising, as required under Sec.  403.1202. 
See McCormick & Co, Inc., Pepper Prod. Mktg. & Sales Practices Litig., 
215 F. Supp. 3d 51, 57 (D.D.C. 2016)(`` `[I]t is the stuff of the most 
elementary economic texts that if two firms are offering a similar 
product for different prices, the firm offering the lower price will 
draw away customers from its competitor.' '') (quoting Am. Soc'y of 
Travel Agents, Inc. v. Blumenthal, 566 F.2d 145, 157 (D.C. Cir. 1977) 
(Bazelon, C.J., dissenting)). Furthermore, the Lanham Act can be an 
effective enforcement tool even in the absence of direct evidence of 
lost sales or other competitive injury. Courts have held that there is 
no requirement that a competitor prove direct injury in order to bring 
an action to enjoin conduct that violates section 43(a) of the Lanham 
Act. See, e.g., Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1335 
(8th Cir. 1997) (``A plaintiff suing to enjoin conduct that violates 
the Lanham Act need not prove specific damage.''); Southland Sod Farms 
v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997). Thus, even if 
a manufacturer were unable to prove direct injury from the omission of 
accurate pricing information from a competitor's advertisement, it 
would not be precluded from bringing an action under the Lanham Act 
seeking to enjoin the competitor from continued use of that false or 
misleading advertisement.
---------------------------------------------------------------------------

    \46\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019; 179(3): 435-437. (``2019 JAMA Study'').
---------------------------------------------------------------------------

2. State Preemption
    Comment: Three commenters had comments on proposed Sec.  
403.1204(b), preempting the exercise of State laws based on the pricing 
statement required in the proposed rule. One commenter stated that 
remedies under State law, particularly those that could be accessed by 
consumers, should be available as a supplement to the Lanham Act remedy 
cited in the proposed rule with respect to information revealed as a 
result of the pricing statement required in the proposed rule. Two 
other commenters supported the transparency provisions of the proposed 
rule, but asked that CMS clarify that these provisions represent a 
``floor,'' such that State laws that impose transparency requirements 
that go further than those in the proposed rule should not be pre-
empted.
    Response: As noted in the preamble to the proposed rule, we believe 
that the Lanham Act is the appropriate mechanism for addressing 
improper drug manufacturer practices that may be revealed as the result 
of the reporting required by this rule. We remain concerned that the 
pricing statement required under this final rule could give rise to the 
use of State law requirements or remedies in a manner that could result 
in litigation costs involving potentially meritless cases that could 
defeat the goal of this rule of lowering drug prices. We appreciate the 
comment for highlighting a potential ambiguity in the proposed 
preemption provision. We do not intend for this rule to create an 
environment where states would impose varying disclosure requirements 
on television advertisements that may air in each respective state. We 
did not intend that the rule would create a regulatory ``floor.'' To 
ensure that prescription pharmaceutical advertisements on television 
would not have to vary from state to state, we have modified the 
preemption language at Sec.  403.1204(b) as set out in the regulatory 
text at the end of this rule.
3. Alternative Enforcement Mechanisms
    We sought comment on whether compliance with this rule should be a 
condition of payment, directly or indirectly, from these federal health 
care programs.
    Comment: Several commenters suggested that CMS consider additional 
enforcement mechanisms, including ones the government could initiate, 
to ensure compliance with the requirement to disclose drug pricing 
information. Some of these commenters also responded directly to our 
request for comments as to whether compliance with this rule should be 
a condition of payment, directly or indirectly, under Medicare and 
Medicaid, by asserting that such a requirement would be more effective 
than either the public list or the threat of lawsuits under the Lanham 
Act. One commenter agreed that making compliance a condition of either 
coverage or payment would be a stronger enforcement mechanism, but 
noted that pursuing either of these options would require a change in 
law.
    Response: We thank the commenters for their suggestions. For the 
reasons explained previously, we continue to believe that posting a 
list of drugs and biological products identified by the Secretary to be 
advertised in violation of this final rule on the CMS internet website, 
coupled with the threat of private actions under the Lanham Act for 
false or misleading advertising, is the most appropriate approach to 
enforcing the requirements of this final rule. In reaching this 
conclusion, we carefully evaluated the alternative of making compliance 
with this rule a condition of payment under Medicare and Medicaid, 
including the comments recommending this approach. At this time, we do 
not believe that more stringent regulation is warranted, but will 
continue to assess compliance. If there is absence of robust 
compliance, then the Secretary will re-evaluate potential options and 
consider further rulemaking in this area.
    In summary, we are finalizing this rule as proposed, except for the 
technical changes to Sec.  403.1202 described above to improve clarity, 
the modification at Sec.  403.1204(b) in response to comments, and 
technical changes to Sec. Sec.  403.1201(d) and 403.1204(a) to use 
defined terms.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), we are required to provide 30-day notice in the Federal Register 
before a collection of information requirement is submitted to the 
Office of Management and Budget (OMB) for review and approval. We 
solicited public comment on the issues in this document that contain 
information collection requirements (ICRs).
    Comment: Some comments assert that the rule would be unduly 
burdensome in that it would clutter the advertisement and would require 
monthly updates.
    Response: Please see the response to comments on the burden of the 
rule in Section II.D.

A. Wage Data

    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics' (BLS') May 2016 National Occupational Employment and Wage 
Estimates for all salary estimates (https://www.bls.gov/oes/current/oes_nat.htm). In this regard, the following table presents the mean 
hourly wage, the cost of fringe benefits and overhead (calculated at 
100 percent of salary), and the adjusted hourly wage.

[[Page 20754]]



                          Table 2--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                                     Adjusted
                      BLS occupation title                          Occupation      Mean hourly   hourly wage ($/
                                                                       code         wage ($/hr)         hr)
----------------------------------------------------------------------------------------------------------------
Office and Administrative Support Occupations...................         43-0000          $17.91          $35.82
Marketing and Sales Managers....................................         11-2020           66.52          133.04
Lawyers.........................................................         23-1011           67.25          134.50
----------------------------------------------------------------------------------------------------------------

B. Information Collection Requirements Regarding Pricing Information 
(Sec.  403.1202)

    Section 403.1202 requires that advertisements for certain 
prescription drug or biological products on television (including 
broadcast, cable, streaming, and satellite), contain a statement or 
statements indicating the Wholesale Acquisition Cost (referred to as 
the list price) for a typical 30-day regimen or for a typical course of 
treatment, whichever is most appropriate, as determined on the first 
day of the quarter during which the advertisement is being aired or 
otherwise broadcast. The presentation of this information must appear 
in a specific format. As stated in this final rule, the notification 
must be presented as follows, ``The list price for a [30-day supply of] 
[typical course of treatment with] [name of prescription drug or 
biological product] is [insert list price]. If you have health 
insurance that covers drugs, your cost may be different.''
    We estimate that 25 pharmaceutical companies will run an estimated 
300 distinct pharmaceutical advertisements that appear on television 
each quarter and will be affected by this rule. For these 
advertisements, we estimate that administrative support staff and 
marketing managers will need to verify the prescribed language and that 
the correct price appears in each advertisement each quarter.
    We estimate that this will require 10 minutes and $5.97 ($35.82/hr 
x .167) per advertisement for administrative support staff. We also 
estimate five minutes and $11.09 ($133.04/hr x .083) per advertisement 
for marketing managers, for a total of 15 minutes (0.25 hours) and 
$17.06 ($5.97 + $11.09) per advertisement per quarter or 300 hours per 
year across all pharmaceutical companies running affected televised 
advertisements ((300 ads/quarter) x (4 quarters/year) x (.25 hours/
ad)). As a result, using wage information provided in Table 2, we 
estimate costs of $20,472 (1,200 ads x $17.06/ad) per year in each year 
following publication of the final rule after adjusting for overhead 
and benefits.
    We are in the process of obtaining OMB approval for the 
aforementioned information collection requirements. Subsequent to the 
proposed rule, we published a separate 60-day Federal Register notice 
announcing the proposed information collection activity and soliciting 
comments. The 60-day notice published on April 8, 2019 (84 FR 13929) 
and also instructs the public on how to obtain copies of the 
information collection request (ICR) for review and comment. We will 
also publish a separate 30-day notice to announce the formal submission 
the ICR to OMB. At that time, the public will have an additional 
opportunity to review and submit comments on the ICR. These 
requirements are not effective until they have been approved by the 
OMB.

IV. Regulatory Impact Analysis

A. Statement of Need

    This final rule aims to improve the quality, accessibility and 
affordability of the Medicare and Medicaid programs and to improve the 
CMS customer experience by providing transparency into drug prices with 
the goal of reducing the price to beneficiaries of certain prescription 
drugs and biological products. Currently, consumers have incomplete 
information regarding the cost of pharmaceutical products. As a result, 
they lack important information needed to inform their decisions, which 
likely leads to inefficient utilization of prescription drugs or 
biological product. This rule requires disclosure of prices to the 
general public for prescription drug and biological products advertised 
on television. This may improve awareness and allow the general public 
to respond, potentially increasing the efficiency of prescription drug 
or biological product utilization. While we expect this rule to put 
downward pressure on the list prices of drugs, we cannot quantify the 
level of this impact because there is not data or examples that we can 
use.

B. Overall Impact

    We acknowledge that examination of the impact of this final rule is 
required by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 18, 2011), the (RFA) (September 19, 1980, 
Pub. L. 96-354), Section 1102(b) of the Social Security Act, Section 
202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995; 
Pub. L., Public Law 104-4), Executive Order 13132 on Federalism (August 
4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    The Regulatory Flexibility Analysis (RFA), as amended, requires 
agencies to analyze options for regulatory relief of small entities, if 
a rule has a significant impact on a substantial number of small 
entities. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and small governmental 
jurisdictions. HHS considers a rule to have a significant economic 
impact on a substantial number of small entities if at least five 
percent of small entities experience an impact of more than three 
percent of revenue. As discussed in the impact analysis, we calculate 
the administrative costs (excluding opportunity costs of screen time 
newly dedicated to displaying pricing information) of the changes per 
affected business over 2020-2024. The estimated average administrative 
costs of the rule per business peak in 2020 at approximately $2,900, 
and are approximately $1,300 in subsequent years. We note that 
relatively large entities are likely to experience proportionally 
higher costs. As discussed below, total administrative costs of the 
rule are estimated to be $5.2 million in 2020 and $2.4 million in 
subsequent years. According to the U.S. Census, 1,775 pharmaceutical 
and medicine manufacturing firms operating in the U.S. in 2015 had 
annual payroll of $23.2 billion. Since the estimated administrative 
costs of this proposed rule are a tiny fraction of payroll for covered 
entities, the Department concludes that the rule will not have a 
significant economic impact on a substantial number of small entities 
and the Secretary so certifies.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory analysis for any rule or regulation under Title XVIII, Title 
XIX, or Part B of the Act that may have significant impact on the 
operations of a substantial number

[[Page 20755]]

of small rural hospitals. We are not preparing an analysis for section 
1102(b) of the Act because the Secretary certifies that this rule will 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    Section 202 of UMRA also requires that agencies assess anticipated 
costs and benefits before issuing any rule whose mandates require 
spending that may result in expenditures in any one year of $100 
million in 1995 dollars, updated annually for inflation. In 2018, that 
threshold is approximately $154 million. This rule is not anticipated 
to have an effect on State, local, or tribal governments, in the 
aggregate, of $154 million or more. Going forward, we believe that this 
rule will not impose mandates on the private sector that would result 
in an expenditure that exceeds the UMRA ceiling.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirements or costs on 
state and local governments, preempts state law, or otherwise has 
Federalism implications. Since reviewing this rule does not impose any 
substantial costs on state or local governments, under the requirements 
threshold criteria of Executive Order 13132 are not applicable, we have 
determined that this rule would not significantly affect the rights, 
roles, and responsibilities of State or local governments.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The 
Office of Management and Budget has determined that this is an 
economically significant regulatory action. In accordance with the 
provisions of Executive Order 12866, this rule was reviewed by the 
Office of Management and Budget.
    This final rule is considered an Executive Order 13771 (January 30, 
2017) regulatory action. We estimated that it will impose $2.45 million 
in annualized costs at a seven percent discount rate, discounted to a 
2016 equivalent, over a perpetual time horizon.
    Comment: One commenter stated that the proposed rule's impact 
analysis was flawed because it did not show that consumers lack 
adequate information about list prices for prescription drugs or 
biological products and overlooked costs to consumers and 
manufacturers. The commenter recommended that CMS more clearly identify 
a market failure that would be addressed by the rule; more thoroughly 
assess the rule's costs; more thoroughly review available literature on 
the effects of mandatory price disclosure in pharmaceutical markets; 
and conduct its own studies of the rule's potential effects on consumer 
and manufacturer behavior.
    Response: We disagree that consumers currently have adequate 
information on list prices for prescription drugs or biological 
products, because they do not have readily available access to 
prescription drug or biological product prices. Though some variation 
of drug prices are available online, we have shown that consumers are 
not currently effectively using these online resources to find this 
information or identify health insurance products and treatments that 
are most cost effective for the patient.\47\ We have also shown that 
including the price in DTC changes patient behavior, showing that 
making the information easily available provides valuable information 
that patients would use for decision making.\48\ Finally, we have seen 
that 88 percent of Americans (i.e., consumers) want the prices to be 
listed in DTC advertisements, showing that even though the prices may 
be available through other sources, such as online, it is important to 
them to have the prices listed on advertisements to have the valuable 
information readily accessible.\49\ We believe that we have identified 
a market failure and assessed the rule's cost. We believe that it is 
unnecessary to pilot the intervention in this rule because a recent 
study previews the potential impact of the rule. Furthermore, one 
pharmaceutical company conducted their own research and ultimately 
decided to proceed on their own in the absence of regulation. It is 
unclear how a small-scale pilot would provide additional information 
that would support changing the policy. As discussed above, studies 
have shown patient responses to list prices being included in DTC 
television advertisements and shown that many effects (including 
adverse effects) can be mitigated through disclaimers such as the one 
included in this rule. Additionally, manufacturers are free to add 
additional statements to their advertisements addressing these 
concerns.
---------------------------------------------------------------------------

    \47\ Zhou C and Zhang Y. The vast majority of Medicare Part D 
beneficiaries still don't choose the cheapest plans that meet their 
medication needs. Health Aff. 2012 Oct;31(10):2259-65.
    \48\ Garrett JB, Tayler WB, Bai G, et al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``2019 JAMA Study'').
    \49\ Kirzinger A, Lopes L, We B, and Brodie M. KFF Health 
Tracking Poll--February 2019: Prescription Drugs. Kaiser Family 
Foundation. 2019 March 01. https://www.kff.org/8c7d090/.
---------------------------------------------------------------------------

C. Anticipated Effects

    This rule will affect the operations of prescription drug or 
biological product manufacturers. According to the U.S. Census, there 
were 1,775 pharmaceutical and medicine manufacturing firms operating in 
the U.S. in 2015.\50\ We estimate that this rule will require 
individuals employed by these entities to spend time in order to comply 
with these regulations. We estimate the hourly wages of individuals 
affected by this rule using the May 2017 National Occupational 
Employment and Wage Estimates provided by the U.S. Bureau of Labor 
Statistics. We assume that the total dollar value of labor, which 
includes wages, benefits, and overhead, is equal to 200 percent of the 
wage rate. We note that, throughout, estimates are presented in 2016 
dollars. We use the wages of Lawyers as a proxy for legal staff, the 
wages of Marketing and Sales Managers as a proxy for marketing 
management staff, and Office and Administrative Support Occupations as 
a proxy for administrative support staff. Estimated hourly rates for 
all relevant categories are included in Table 3 below.
---------------------------------------------------------------------------

    \50\ U.S. Census. 2015 SUSB Annual Data Tables by Establishment 
Industry. https://www.census.gov/data/tables/2015/econ/susb/2015-susb-annual.html.

                          Table 3--Hourly Wages
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Marketing and Sales Managers................................      $66.52
Lawyers.....................................................       67.25
Office and Administrative Support Occupations...............       17.91
------------------------------------------------------------------------

1. Direct Staff Costs of Implementation
    We expect that the costs associated with the initial review by all 
companies of the policy, an ongoing review by all companies to ensure 
that they are in compliance with the policy, and the individual review 
of commercials for companies that produce DTC television 
advertisements.
(a) Initial Review After Publication
    In order to comply with the regulatory changes adopted in this 
rule, affected businesses would first need to review the rule. We 
estimate that this would require an average of two hours for affected 
businesses to review, divided evenly between marketing managers and

[[Page 20756]]

lawyers, in the first year following publication of the final rule. As 
a result, using wage information provided in Table 2, this implies 
costs of $474,884 in the first year following publication of a final 
rule after adjusting for overhead and benefits.\51\
---------------------------------------------------------------------------

    \51\ 1,755 firms x (1 hour of legal work x 200% x $67.25 + 1 
hour of marketing work x 200% x $66.52) = $474,884.
---------------------------------------------------------------------------

(b) Initial and Ongoing Compliance
    After reviewing the rule, prescription drug or biological product 
manufacturers will review their marketing strategies in the context of 
these new requirements, and determine how to respond. For some affected 
entities, this may mean substantially changing their advertising 
paradigm or pricing strategy. For others, much more modest changes are 
likely needed. We estimate that this would result in affected 
businesses spending an average of 20 hours reviewing their policies and 
determining how to respond, with 5 hours spent by lawyers and 15 hours 
spent by marketing managers, in the first year following publication of 
the final rule. In subsequent years, we estimate this would result in 
marketing managers at affected businesses spending an average of 10 
hours implementing policy changes. As a result, using wage information 
provided in Table 2, we estimate costs of $4.74 million in the first 
year \52\ and $2.36 million in subsequent years \53\ following 
publication of this final rule after adjusting for overhead and 
benefits.
---------------------------------------------------------------------------

    \52\ 1,775 firms x (5 hours of legal work x 200% x $67.25 + 15 
hours of marketing work x 200% x $66.52) = $4,735,878.
    \53\ 1,775 firms x (10 hours of marketing work x 200% x $66.52) 
= $2,361,460.
---------------------------------------------------------------------------

(c) Direct Advertisement Review
    We estimate that 25 pharmaceutical companies will run an estimated 
300 distinct pharmaceutical advertisements that appear on television 
each quarter and will be affected by this rule. For these 
advertisements, we estimate that administrative support staff and 
marketing managers will need to verify the prescribed language and that 
the correct price appears in each advertisement each quarter. We 
estimate that this will require 10 minutes and $5.97 ($35.82/hr x .167) 
per advertisement for administrative support staff. We also estimate 
five minutes and $11.09 ($133.04/hr x .083) per advertisement for 
marketing managers, for a total of 15 minutes (0.25 hours) and $17.06 
($5.97 + $11.09) per advertisement per quarter or 300 hours per year 
across all pharmaceutical companies running affected televised 
advertisements ((300 ads/quarter) x (4 quarters/year) x (.25 hours/
ad)). As a result, using wage information provided in Table 2, we 
estimate costs of $20,472 (1200 ads x $17.06/ad) per year in each year 
following publication of the final rule after adjusting for overhead 
and benefits.
2. Direct Costs for Changes to Advertisements
    We may also want to consider the opportunity costs for the space in 
the advertisement that includes the list price that could have been 
used for other purposes. A reasonable estimate is that compliance 
requires 1percent of the screen space and four seconds of a 75-second 
commercial. That means that the opportunity cost attributable could be 
approximately $2.24 million = (1% x 4/75 x $4.2 billion DTC television 
advertising spending). We note that current DTC television 
advertisements currently use space to refer patients to their website 
for additional information, and that same space can include that 
website and include the list price as a reference (i.e., the 
advertisements could provide this information in the space that is 
already dedicated to referring patients to additional information).
    In markets for prescription drugs and biological products, 
consumers often need to make decisions with incomplete information 
about prices. As a result, consumers are unable to make decisions that 
best suit their needs. This rule may improve price transparency for 
consumers in order to ensure that their decisions better align with 
their preferences and their budget, potentially improving the 
allocation of resources in the prescription drug market. On the other 
hand, consumers, intimidated and confused by high list prices, may be 
deterred from contacting their physicians about drugs or medical 
conditions. Consumers might believe they are being asked to pay the 
list price rather than a co-pay or co-insurance and wonder why they are 
paying so much when they already paid a premium for their drug plan. 
This could discourage patients from using beneficial medications, 
reduce access, and potentially increase total cost of care. We lack 
data to quantify these effects.
    In addition, we believe that this rule may provide a moderating 
force to counteract prescription drug or biological product price 
increases. This rule will provide direct evidence of prescription drug 
or biological product prices to the general public, potentially 
improving awareness and allowing the general public to signal in some 
cases that prescription drug or biological product prices have risen 
beyond their willingness to pay. We believe that this, in turn, may 
further improve the rule's effect on the efficient utilization of 
prescription drugs or biological products. We lack data to quantify 
these effects.
    We believe that this rule may also have impacts along other 
dimensions. In particular, it may affect the number of televised DTC 
advertisements, the rate at which televised DTC advertisements are 
updated, prices for prescription drugs or biological products, the set 
of pharmaceutical products available for sale, and utilization of 
various prescription drugs or biological products. A possibility not 
reflected in the quantitative estimates above is that drug companies 
would find the cost of revising their advertisements to be 
prohibitively expensive (for example, if they change their WACs so 
frequently that there is extensive monitoring and revision necessary to 
ensure that advertisements airing on a particular day match the WAC for 
that day). In this case, DTC television advertising would be reduced. 
However, we think this is unlikely as prices are usually changed on a 
twice-a-year cycle, and manufacturers may already frequently revise 
their advertisements to align with quarterly marketing plans. We 
requested comment, but did not get any comments, on the following 
questions:
     What is the frequency with which WACs are changed?
     What would be the effect of this potential advertising 
reduction on patient behavior, including as regards the information 
they seek out from their medical providers?
     How might patient outcomes vary depending on advertising 
choices among competitor drug companies? For example, if only some 
producers of drugs that treat a particular condition cease advertising 
on television, are patients likely to switch between drug brands--from 
the no-longer-advertised to the advertised? If all producers of drugs 
for a condition cease advertising on television, to what extent are 
patients likely to switch to other forms of treatment--such as 
surgery--or to forgo treatment?
     To what extent will drug companies, in order to increase 
the feasibility of continuing to advertise on television, reduce the 
frequency of changing their WACs? What would be the consequences for 
drug supply chains and the prices experienced by patients and other 
payors?
    Furthermore, the Department recognizes that some studies indicate 
DTC advertising increases disease awareness, and that if this rule 
decreases disease awareness such that

[[Page 20757]]

untreated illness occurs, there may be other impacts. We lack data to 
quantify the effects of this rule along these dimensions.
    Comment: One commenter suggested that the RIA overlooks the costs 
to pharmaceutical industry due to potential lost sales.
    Response: We disagree with this comment because there is no clear 
evidence that posting the list price will adversely affect sales. As 
discussed in Section II.C., including a disclaimer that the drug could 
be available at a lower price, such as the wording we include in this 
rule, mitigate patient concerns about price. This rule makes the 
patient a more informed consumer. At the same time, the information is 
not expected to cause patients to forgo treatment. Instead, patients 
may select the lowest cost alternative, so the revenue is still going 
into the industry as a whole. It may be a transfer from high cost drugs 
to their marginally lower cost alternatives. Additionally, as discussed 
above, it is difficult to predict exactly how the industry will 
respond, but one potential is that their list prices are lowered closer 
to their net price, so while the list price would go down, it would not 
necessarily affect the revenue going into the industry.
    Comment: One commenter suggested that we overlooked potential costs 
to consumers based on their behavior changes, such as choosing to forgo 
treatment.
    Response: We disagree with this comment for the same reason we 
disagree with the above comment. The 2019 JAMA Study showed that 
including a stipulation that the medication could be available at a 
lower price mitigates potential adverse, unintended consequences,\54\ 
so we do not expect patients to choose to forego treatment. Instead, we 
expect them to become informed consumers that engage in shared-decision 
making with their providers, which may allow them to select the lowest 
cost alternative based on their specific situation. This can reduce the 
cost to the patient while increasing revenue to some manufacturers in 
reducing the revenue to others.
---------------------------------------------------------------------------

    \54\ Garrett JB, Tayler WB, Bai G, et. al. Consumer Responses to 
Price Disclosure in Direct-to-Consumer Pharmaceutical Advertising. 
JAMA Intern Med. 2019;179(3):435-437. (``JAMA 2019 Study'').
---------------------------------------------------------------------------

D. Alternatives Considered

    We carefully considered the alternative of maintaining the status 
quo and not pursuing regulatory action. However, we believe that the 
price transparency is fundamental to ensuring that prescription drug 
and biological product markets function properly. This rule may improve 
price transparency in order for consumers to make better decisions. As 
a result, we have determined that the benefits of the rule justify the 
costs imposed on industry, and as a result we chose to pursue this 
regulatory action.
    We also carefully considered requiring the disclosure of 
alternative or additional prices, which better reflect the actual costs 
paid by patients and payors. If an alternative definition were used for 
list price, the burden imposed by the rule would likely be higher. For 
example, manufacturers set the Wholesale Acquisition Cost, also known 
as list price, for their products. The Department recognizes that other 
prices may be paid by distributors, pharmacies, patients, and others in 
the supply chain. Because these other prices vary by contracts 
established by payors or others, only the WAC is certain to be known by 
the manufacturer when creating DTC advertisements. As such, it would be 
harder for manufacturers to report prices other than Wholesale 
Acquisition Cost. We believe that requiring the disclosure of WAC 
minimizes administrative burden among feasible alternatives and 
balances the need to provide information to the general public.

E. Accounting Statement

                     Table 3--Accounting Table of Benefits and Costs of All Proposed Changes
----------------------------------------------------------------------------------------------------------------
                                                   Present value over 2020-2024     Annualized value over 2020-
                                                   by discount rate (millions of       2024 by discount rate
                                                           2016 dollars)            (millions of 2016 dollars)
                                                 ---------------------------------------------------------------
                                                     3 Percent       7 Percent       3 Percent       7 Percent
----------------------------------------------------------------------------------------------------------------
Benefits:
    Quantified Benefits.........................               0               0               0               0
----------------------------------------------------------------------------------------------------------------
Non-quantified Benefits.........................................................................................
Improved transparency for prescription drug and biological product prices.......................................
----------------------------------------------------------------------------------------------------------------
Costs:
    Quantified Costs............................            25.6            23.1             6.1             6.8
----------------------------------------------------------------------------------------------------------------
Non-quantified Costs Due to Lack of Data........................................................................
Costs based on resulting changes in drug prices.................................................................
Costs based on potential changes in manufacturer behavior based on perceived value of DTC advertising...........
Costs based potential changes in patient and provide behavior...................................................
----------------------------------------------------------------------------------------------------------------

List of Subjects in 42 CFR Part 403

    Grant programs-health, Health insurance, Hospitals, 
Intergovernmental relations, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 403--SPECIAL PROGRAMS AND PROJECTS

0
1. The authority citation for part 403 is revised to read as follows:

    Authority:  42 U.S.C. 1302, and 1395hh.


0
2. Subpart L is added to read as follows:
Subpart L--Requirements for Direct-to-Consumer Television 
Advertisements of Drugs and Biological Products To Include the List 
Price of That Advertised Product
Sec.
403.1200 Scope.
403.1201 Definitions.
403.1202 Pricing information.
403.1203 Specific presentation requirements.
403.1204 Compliance.

[[Page 20758]]

Subpart L--Requirements for Direct-to-Consumer Television 
Advertisements of Drugs and Biological Products To Include the List 
Price of That Advertised Product


Sec.  403.1200   Scope.

    (a) Covered pharmaceuticals. Except as specified in paragraph (b) 
of this section, this subpart applies to advertisements for a 
prescription drug or biological product distributed in the United 
States for which payment is available, directly or indirectly, under 
titles XVIII or XIX of the Social Security Act.
    (b) Excepted pharmaceuticals. An advertisement for any prescription 
drug or biological product that has a list price, as defined in Sec.  
403.1201, less than $35 per month for a 30-day supply or typical course 
of treatment shall be exempt from the requirements of this subpart.


Sec.  403.1201   Definitions.

    For the purposes of this subpart, the following definitions apply:
    (a) Biological product. Biological product means any biological 
product, as that term is defined in Public Health Service Act (``PHS 
Act'') section 351(i), that is licensed by the Food and Drug 
Administration pursuant to section 351 and is subject to the 
requirements of Federal Food, Drug, and Cosmetic Act (FDCA) section 
503(b)(1).
    (b) Prescription drug. Prescription drug means any drug, as defined 
in the FDCA section 201(g), that has been approved by the Food and Drug 
Administration pursuant to FDCA section 505 and is subject to the 
requirements of FDCA section 503(b)(1).
    (c) List price. List price means the wholesale acquisition cost, as 
defined in paragraph (d) of this section.
    (d) Wholesale acquisition cost. Wholesale acquisition cost means, 
with respect to a prescription drug or biological product, the 
manufacturer's list price for the prescription drug or biological 
product to wholesalers or direct purchasers in the United States, not 
including prompt pay or other discounts, rebates or reductions in 
price, for the most recent month for which the information is 
available, as reported in wholesale price guides or other publications 
of drug or biological product pricing data.


Sec.  403.1202   Pricing information.

    Any advertisement for any prescription drug or biological product 
on television (including broadcast, cable, streaming, or satellite) 
must contain a textual statement indicating the current list price for 
a typical 30-day regimen or for a typical course of treatment, 
whichever is most appropriate, as determined on the first day of the 
quarter during which the advertisement is being aired or otherwise 
broadcast, as follows: ``The list price for a [30-day supply of ] 
[typical course of treatment with] [name of prescription drug or 
biological product] is [insert list price]. If you have health 
insurance that covers drugs, your cost may be different.'' Where the 
price is related to the typical course of treatment and that typical 
course of treatment varies depending on the indication for which a 
prescription drug or biological product is prescribed, the list price 
to be used is the one for the typical course of treatment associated 
with the primary indication addressed in the advertisement.


Sec.  403.1203   Specific presentation requirements.

    The textual statement described in Sec.  403.1202 shall be 
presented at the end of an advertisement in a legible manner, meaning 
that it is placed appropriately and is presented against a contrasting 
background for sufficient duration and in a size and style of font that 
allows the information to be read easily.


Sec.  403.1204   Compliance.

    (a) Identification of non-compliant products. The Secretary will 
maintain a public list that will include the prescription drugs and 
biological products identified by the Secretary to be advertised in 
violation of this subpart.
    (b) State or local requirements. No State or political subdivision 
of any State may establish or continue in effect any requirement 
concerning the disclosure in a television advertisement of the pricing 
of a prescription drug or biological product which is different from, 
or in addition to, any requirement imposed by this subpart.

    Dated: April 25, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: April 26, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-09655 Filed 5-8-19; 8:45 am]
 BILLING CODE 4120-01-P