83 FR 52789 - Medicare and Medicaid Programs; Regulation To Require Drug Pricing Transparency
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services Federal Register Volume 83, Issue 202 (October 18, 2018)
Centers for Medicare & Medicaid Services
Federal Register Volume 83, Issue 202 (October 18, 2018)
| Page Range | 52789-52799 | |
| FR Document | 2018-22698 |
[Federal Register Volume 83, Number 202 (Thursday, October 18, 2018)] [Proposed Rules] [Pages 52789-52799] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-22698] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 403 [CMS-4187-P] RIN 0938-AT87 Medicare and Medicaid Programs; Regulation To Require Drug Pricing Transparency AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: This proposed rule would revise the Federal Health Insurance Programs for the Aged and Disabled by amending 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. We are proposing this regulation 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 not only their out-of-pocket costs, but also expenditures borne by Medicare and Medicaid, both of which are significant problems. DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 17, 2018. ADDRESSES: In commenting, please refer to file code CMS-4187-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the ``Submit a comment'' instructions. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4187-P, P.O. Box 8013, Baltimore, MD 21244-8013. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4187-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Cheri Rice, (410) 786-6499. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to view public comments. I. Background A. Purpose The purpose of this proposed rule is to reduce the price to consumers of prescription drugs and biological products. This rule would require direct-to-consumer (DTC) television advertisements for prescription drug 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. We are proposing this regulation 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 not only their out-of-pocket costs, but also unreasonable expenditures borne by Medicare and Medicaid, both of which are significant problems. Markets operate more efficiently when consumers have relevant information about a product, including its price, as well as alternative products and their prices, before making an informed decision whether to buy that product or, instead, a competing one. Consumers price shop when looking to purchase a new car, a new house, or even a new coffee maker. Price shopping is the mark of rational [[Page 52790]] economic behavior. To facilitate price shopping, sellers invariably provide potential buyers with the prices of their products; consumers gauge the reasonableness of these prices against alternatives. Even automobile dealerships, as result of federal law, post the retail or ``sticker'' price on the side window of each new car offered for sale. That has not been the case with 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, but for consumers of prescription drugs, 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 and causes distortions, such as an absence of meaningful prices and the information and incentives that prices provide. In many cases prescription drug coverage is provided by an employer to its employees, or by the federal government to Medicare and Medicaid beneficiaries. These entities providing prescription drug coverage are known as payors. List price plays a role in negotiations between payors, Pharmacy Benefit Managers (PBMs), and manufacturers, which all impact beneficiary cost sharing. Payors hire third party providers such as PBMs to manage the payor's prescription drug benefit for the payor's employees and negotiate improved drug pricing for medications based on the level of utilization management a payor is willing to apply to the benefit. Prescription drug benefit designs are typically based on the manufacturer's list price, however, in many cases the PBM can negotiate a lower price than a manufacturer's list price if there is high deductible plans, copay or coinsurance, formulary either tiered or closed, utilization management including step therapy and prior authorizations. The willingness of a payor to apply varying degrees of utilization control impacts savings for each individual payor and beneficiary. A PBM could have ten different clients with ten different benefit designs and it would be possible that an employee from each client could get the exact same product and all ten could pay a different price. A number of factors make list price relevant across a variety of drug benefit designs, even though the PBM may have negotiated a lower price for the product dispensed to the beneficiary. First, in the commercial market, over 40% of beneficiaries are in high deductible plans. Under such plans, beneficiaries pay the full list price of the product until they meet their deductible, which can be thousands of dollars. Second, benefit designs are built off of list price, because the negotiated rebate rate is not paid until months after the product was dispensed. Third, co-insurance has become a standard payor mechanism applicable to high cost drugs, requiring the patient to pay a percentage of the list price. All of the top 10 PDPs use coinsurance rather than fixed dollar copayments for medications on nonpreferred drug tiers, charging 30 percent to 50 percent of each prescription's full price in 2017.\1\ Finally, very few drugs have coverage on all the formularies in the country. If a plan does not cover a particular drug requested by a patient, then the patient may have to pay the full list price to access the medication. --------------------------------------------------------------------------- \1\ MEDPAC Report to the Congress: Medicare Payment Policy. March 2017. 383. --------------------------------------------------------------------------- Due at least in part to the market-distorting effects of third- party payors, pharmaceutical manufacturers tend not to compete based on list price, and hence there is little to no market pressure voluntarily to disclose a product's list price. Not only does transparency promote a more competitive environment, but data indicate that it will likely motivate manufacturers to be less willing to raise prices, which have dramatically increased over the past decade. See, e.g., John F. Cady, ``An Estimate of the Price Effects of Restrictions on Drug Advertising,'' 44 Economic Inquiry, 493-510 (Dec. 1976) (finding that prescription drug prices were 4.3% higher on average in states restricting advertising of prices than in states allowing such advertising.). While study results vary depending on the design, the population studied, and product at issue, according to the Congressional Research Service [m]ost research suggests that when better price information is available prices for goods sold to consumers fall. The largest and most straightforward body of evidence relates to the effect of advertising, where nearly all research indicates advertising prices is associated with lower prices. This reduction in prices suggests that advertising's increased information on prices and increases in competition outweigh any tendency to increase prices through increasing demand and brand identification.\2\ --------------------------------------------------------------------------- \2\ D. Andrew Austin and Jane G. Gravelle, ``Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector, CRS Report 46 (July 24, 2007). This proposed rule seeks to fill this informational gap by adding a new subpart L to part 403 to title 42 that would require that for prescription drug and biological products that can be reimbursed directly or indirectly through or under Medicare or Medicaid, DTC ads on television (including broadcast, cable, streaming, and satellite communication) for such products must include the product's current list price, defined as the Wholesale Acquisition Cost.\3\ CMS is proposing this rule in the context of broadcast advertisements, an area in which the Supreme Court historically has recognized that the government may take special steps to help ensure that viewers receive appropriate information. See Red Lion Broad. Co. v. FCC, 395 U.S. 367, 390, 394 (1969) (``It is the right of the viewers and listeners, not the right of the broadcasters, which is paramount.''). --------------------------------------------------------------------------- \3\ Over-the-counter drugs covered by Medicaid, to the extent that they cost more than $35 per month, are not within the scope of this rule. --------------------------------------------------------------------------- B. Legal Authority HHS recognizes that ``an administrative agency's power to regulate . . . must always be grounded in a valid grant of authority from Congress.'' Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000). Thus, in proposing new regulations HHS must pay close attention to the text and structure of the legislation granting an agency authority. ``Agencies are . . . `bound, not only by the ultimate purposes Congress has selected, but by the means it has deemed appropriate, and prescribed, for the pursuit of those purposes.''' Colorado River Indian Tribes v. Nat'l Indian Gaming Comm'n, 466 F.3d 134, 139-40 (D.C. Cir. 2006) (quoting MCI Telecomms. Corp. v. AT&T, 512 U.S. 218, 231 n.4, (1994)). This proposed rule is issued pursuant to sections 1102 and 1871 of the Social Security Act. Section 1102(a) of the Social Security Act authorizes the Secretary to issue ``such rules and regulations, not inconsistent with this Act, as may be necessary to the efficient administration of the functions . . . under this Act[,].'' The Secretary has ``broad rule-making authority'' under section 1102, for both Medicare and Medicaid. See, e.g., Thorpe v. Housing Authority of City of Durham, 393 U.S. 268, 277 n.28 (1969). Under Section 1871(a), which instructs ``[t]he Secretary [to] prescribe such regulations as may be necessary to carry out the administration of the insurance programs under this title [XVIII],'' the [[Page 52791]] Secretary similarly possesses broad rulemaking authority with respect to the Medicare program. See, e.g., Cottage Health Sys. v. Sebelius, 631 F. Supp. 2d 80, 92 (D.D.C. 2009). Rules issued under such broad rulemaking authorities must be ``sustained so long as [they are] `reasonably related to the purposes of the enabling legislation.' '' and do not contradict or undermine that legislation. Mourning v. Family Publ'ns Servs., Inc., 411 U.S. 356, 369 (1973) (quoting Thorpe, 393 U.S. at 280-81). HHS has concluded that the proposed 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. 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 addition, Congress recognized the value of disclosures about drug prices. In section 1927(b)(3)(A) of the Act, manufacturers with Part B rebate agreements must disclose pricing information to the government, including the average manufacturer price, the manufacturer's average sales price, and at times the manufacturer's wholesale acquisition cost as well as the manufacturer's best price for certain drugs. And in the Part D program, section 1860(k)(1) compels certain sponsors offering prescription drug plans to disclose the difference between the price of a dispensed drug and the price of the lowest priced generic available that is therapeutically equivalent and bioequivalent. This 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. In addition, although Congress has not explicitly provided HHS with authority to compel the disclosure of list prices to the public, Congress has explicitly directed HHS to operate Medicare and Medicaid programs efficiently. Promoting pricing transparency, and thus efficient markets, for drugs funded through those programs falls within the scope of that mandate. Drugs and biological products are covered under the Medicare Part B benefit (authorized by various provisions including sections 1832, 1861(s)(2) of the Social Security Act (the Act)), the Medicare Part D benefit (authorized by section 1860D-1 et seq. of the Act), and as part of hospital inpatient admissions under Medicare Part A's prospective payment system (authorized by Sections 1814, 1886 of the Act). The Medicaid drug benefit is authorized by sections 1902(a)(54) and 1905(a)(12). The Secretary has determined that the proposed regulation is necessary to the efficient administration of the Medicare and Medicaid programs. The Secretary has an obligation to ensure the wise expenditure of federal trust fund dollars, and may promulgate regulations to advance these goals. See, e.g., Sid Peterson Mem'l Hosp. v. Thompson, 274 F.3d 301, 313 (5th Cir. 2001); see also 42 U.S.C. 1395i (Medicare Part A trust fund); 42 U.S.C. 1395t (Medicare Parts B and D trust fund). Efficient administration of both Medicare and Medicaid encompasses federal efforts to achieve good value for funds spent in the Medicare and Medicaid programs. Toward that end, the agency has issued regulations that promote the responsible use of federal funds. See, e.g., 42 CFR part 413, subpart C (limitations on reasonable cost reimbursement), Sec. 421.122 (oversight of contractors), Sec. 424.5 (conditions for payment), Sec. 438.4 et seq. (actuarial soundness of capitation rates). Nonetheless, the cost to the federal government, Medicare beneficiaries, and State Medicaid programs of prescription drugs and biological products has been increasing at an alarming rate due both to increasing prices and increasing utilization. See, e.g., https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/. As discussed further below, DTC advertising without price transparency has a direct nexus to these trends of increasing price and utilization. This proposed regulation combats these trends by ensuring that beneficiaries are provided with relevant information about the costs of prescription drugs and biological products, so they can make informed decisions. Based on a combination of all of these reasons, the Act authorizes HHS to issue this proposed rule. C. The Cost of Prescription Pharmaceuticals to Medicare and Medicaid and Their Beneficiaries Has Been Rising Annually The cost of drugs and biological products over the past decade has increased dramatically, and 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.\4\ --------------------------------------------------------------------------- \4\ ASPE Issue Brief. Observations on Trends in Prescription Drug Spending. March 8, 2016. --------------------------------------------------------------------------- Manufacturers of prescription drugs in competitive classes often offer price concessions in the form of rebates that are paid after the prescription is filled. Manufacturer rebates have grown approximately 10% of gross Part D drug costs in 2008 to 20% of gross Part D drug costs in 2016. The CMS Office of the Actuary projects rebates will exceed 28% of gross Part D drug costs over the next ten years.\5\ --------------------------------------------------------------------------- \5\ 2018 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS. --------------------------------------------------------------------------- Because the list price of a drug does not reflect manufacturer rebates paid to a PBM, insurer, health plan, or government program, obscuring these discounts can shift costs to consumers in commercial health plans and Medicare beneficiaries. Many incentives in the current system reward higher list prices, all participants in the chain of distribution, e.g., manufacturers, wholesalers, pharmacy benefit managers, and even private insurers, gain as the list price of any given drug increases. These financial gains come at the expense of increased costs to patients and public payors, such as Medicare and Medicaid, which ultimately fall on the backs of American taxpayers. Furthermore, consumers who have not met their deductible or are subject to coinsurance, pay based on the pharmacy list price, which is not reduced by the substantial drug manufacturer rebates paid to PBMs and health plans. As a result, the growth in list prices, and the widening gap between list and net prices, markedly increases consumer out-of-pocket spending, particularly for high-cost drugs not subject to negotiation. The Centers for Medicare & Medicaid Services (CMS) is the single largest drug [[Page 52792]] payor in the nation. In 2016, CMS and its beneficiaries spent $174 billion on drugs covered under Parts B and D, and $64 billion on drugs covered under Medicaid. 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. For Part D, according to the 2018 Trustees' Report, CMS's costs have grown, [o]ver 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, there has been a substantial increase in the proportion of prescriptions filled with low--cost generic drugs that has helped constrain cost growth, while there has also been a significant increase in the cost of specialty drugs that has increased cost growth.\6\ --------------------------------------------------------------------------- \6\ 2018 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds at 106, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2018.pdf. 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.\7\ --------------------------------------------------------------------------- \7\ https://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CU_cpibrief. --------------------------------------------------------------------------- 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.\8\ Since 2009, Medicare Part B drug spending grew at an average rate of about 9% per year. About half of the growth in Part B drug spending between 2009 and 2013 was accounted for by price growth, which reflects increased prices for existing products and shifts in the mix of drugs, including the adoption of new drugs.\9\ Medicaid drug spending grew 25% in 2015 and 13% in 2015.\10\ --------------------------------------------------------------------------- \8\ MEDPAC. Report to the Congress: Medicare Payment Policy. March 2018. 415. \9\ MEDPAC. Report to the Congress: Medicare and the Health Care Delivery System. June 2017. 37. \10\ CMS National Health Expenditure Data. 2016. --------------------------------------------------------------------------- Price transparency will help improve the efficiency of Medicare and Medicaid programs by reducing wasteful and abusive increases in drug and biological 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. As discussed further below, consumers make a series of critical health care decisions related to their treatment with prescription drugs, and the list price of those drugs may be informative to those decisions. Even where the consumer may be insured, and therefore will be paying substantially less than the list price, the coinsurance borne by some consumers will necessarily increase as the prices negotiated by PBMs increase. D. Direct-to-Consumer Advertising and Its Role, in Part, in Fueling the Demand for Higher Cost Drugs 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 to make the initial appointment with a physician; whether to ask the physician about a particular drug or drugs; 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 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\ --------------------------------------------------------------------------- \11\ Kantar Media Advertising Intelligence--2013 to 2017 Prescription Medications Ad Spend Data. --------------------------------------------------------------------------- DTC advertising appears to directly affect drug utilization.\12\ Studies show how consumers exposed to drug advertisements can exert sufficient pressure on their physicians to prescribe the advertised product.\13\ In one recent survey, one in eight adults (12%) said they were prescribed a specific drug after asking a doctor about it as a result of seeing or hearing an advertisement.\14\ When manufacturers direct their DTC advertising to consumers, such messaging can help facilitate more informed discussions between consumers and their health care providers in making decisions about treatment. But it can also result in increased utilization through patients demanding costly drugs and biological products based on advertising messaging, with a resulting increase in government spending--a problem if less costly alternatives are available, or would be available through market pressures resulting from greater price transparency. --------------------------------------------------------------------------- \12\ Dhaval Dave & Henry Saffer, Impact of Direct-to-Consumer Advertising on Pharmaceutical Prices and Demand, 79 Southern Economic Journal 97-126 (2012); Balaji Datti & Mary W. Carter, The Effect of Direct-to-Consumer Advertising on Prescription Drug Use by Older Adults, 23 Drugs Aging 71-81 (2006). \13\ Barbara Mintzes et al., Influence of direct to consumer pharmaceutical advertising and patients' requests on prescribing decisions: Two site cross sectional survey, 324 The BMJ 278-79 (2002). \14\ Kaiser Health Tracking Poll (October 2015) https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-october-2015/. --------------------------------------------------------------------------- To have the necessary information in making critical decisions related to prescription drugs, consumers need some idea of the magnitude of the cost of the advertised drug. More informed consumer decision making will impact not only each individual beneficiary's own finances, but also positively affect the shared taxpayer responsibility to fund the Medicare and Medicaid drug benefit programs. E. Transparency in Drug Pricing Promotes Lower Prices and More Informed Purchasing by Beneficiaries Both Titles XVIII and XIX of the 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 [[Page 52793]] consumers have cost sharing obligations that may be significant. As discussed above, DTC advertisements that do not provide pricing information may contribute to rising drug prices and rising premiums. 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 on-line 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, and the patient may not even know exactly which drug is prescribed. Second, meaningful price shopping is further hindered because the average consumer has no anchor price, such as an MSRP for automobiles, to gauge the reasonableness of the various price quotes. Arming a beneficiary with basic price information will provide him or her with an anchor price, in other words, a reference comparison to be used when making decisions about therapeutic options. Triggering conversations about a particular drug or biological 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. We seek comment on how providing consumers with the list price of a medication may influence interactions with prescribers, the selection of drug products, and the perceived efficacy of the prescribed drug. We also seek comment about how benefit design influences these choices. Requiring DTC television ads to disclose pricing information to consumers, as proposed in this rule, is consistent with First Amendment jurisprudence. Rules, such as this one, that require certain factual commercial disclosures pass muster under the First Amendment where the disclosure advances a government interest and does not unduly burden speech. When the government requires accurate disclosures in the marketing of regulated products under appropriate circumstances, it does not infringe on protected First Amendment interests. As the United States Supreme Court recognized in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) and recently confirmed in Nat'l Inst. of Family and Life Advocates v. Becerra, 138 S. Ct. 2361, 2372, 2376 (2018) (``NIFLA''), required disclosures of factual, noncontroversial information in commercial speech may be subject to more deferential First Amendment scrutiny. Under the approach articulated in Zauderer, courts have upheld required disclosures of factual information in the realm of commercial speech where the disclosure requirement reasonably relates to a government interest and is not unjustified or unduly burdensome such that it would chill protected speech. See Zauderer, 471 U.S. at 651; Milavetz v. United States, 559 U.S. 229, 250, 252-53 (2010); NIFLA, 138 S. Ct. at 2376 (``[W]e do not question the legality of . . . purely factual and uncontroversial disclosures about commercial products.''). In addition, the United States Supreme Court has long recognized that broadcast viewers and listeners have a significant First Amendment interest in receiving information about matters of public concern. See Red Lion Broad. Co. v. FCC, 395 U.S. 367, 390, 394 (1969). In this proposed rule, the required disclosure consists of purely factual and uncontroversial information about a firm's own product, namely the list price of the drug or biological product. The required disclosure here advances the government's substantial interest in the efficient administration of both Medicare and Medicaid programs by minimizing unreasonable expenditures. Increased price transparency will help reduce unreasonable expenditures associated with soaring drug costs by providing manufacturers with an incentive to reduce their list prices by exposing overly costly drugs compared to alternatives to public scrutiny, and providing consumers with price information to facilitate more informed health care decisions. See generally Pharm. Care Mgmt. Ass'n v. Rowe, 429 F.3d 294, 310 (1st Cir. 2005) (recognizing that the government interest in cost-effective health care justified disclosure of financial interests of pharmacy benefit managers); N.Y. State Rest. Ass'n v. N.Y. City Bd. of Health, 556 F.3d 114, 134 (2d Cir. 2009) (recognizing that the government interest in ``promot[ing] informed consumer decision-making'' justified posting of calories on menus in chain restaurants). Indeed, the United States Supreme Court has long recognized a strong societal interest in the free flow of information about prescription drug prices: Those whom the suppression of prescription drug price information hits the hardest are the poor, the sick, and particularly the aged. A disproportionate amount of their income tends to be spent on prescription drugs; yet they are the least able to learn, by shopping from pharmacist to pharmacist, where their scarce dollars are best spent. When drug prices vary as strikingly as they do, information as to who is charging what becomes more than a convenience. It could mean the alleviation of physical pain or the enjoyment of basic necessities. Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, 425 U.S. 748, 763-64 (1976). Furthermore, these price disclosures would neither ``drown[ ] out the [speaker's] own message'' or ``effectively rule[ ] out'' a mode of communication. NIFLA, 138 S. Ct. at 2378. Indeed, 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. v. United States Dep't of Transp., 687 F.3d 403, 414 (D.C. Cir. 2012) (requirement for airlines to make total price the most prominent cost figure does not significantly burdens 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). Indeed, there are many regulatory schemes that require the disclosure of price information to consumers. See 12 CFR 1026.33(b)(2) (2018) (mortgage lenders must disclose to consumers total annual loan cost rates for reverse mortgages); 12 CFR 226.18 (2018) (creditors must disclose to borrowers multiple terms including the annual percentage rate); 12 CFR 1030.4(a) and (b) (2018) (depository institutions must provide to a consumer, before an account is opened or service provided, account information including fixed or variable interest rates); Mass. Ann. Laws ch. 94 Section 295C (2018) (retail [[Page 52794]] dealers of motor fuel must publicly display and maintain on each pump a sign on which the price per gallon per grade is clearly visible); Minn. Stat. Section 239.751 (2017) (retail dealers of petroleum must clearly display the price of per gallon and the price cannot be obscured in any way).\15\ --------------------------------------------------------------------------- \15\ In addition, regulated entities are required to report price information to the government in a variety of settings. See, e.g., 7 CFR 59.301(a) and (b) (2018) (packer processing plants must daily report to the Secretary of Agriculture the sale price for lambs which the Secretary of Agriculture then makes public); 7 CFR 59.104(a)(1) (2018) (packer processing plants must report to the Secretary of Agriculture twice a day the sale price of each lot of ``boxed beef'' which the Secretary of Agriculture then makes public); 17 CFR 229.1204(b)(1) (2018) (oil and gas producers must report to the SEC the average sale price per unit of oil, gas, or other product by geographic area for three preceding fiscal years). --------------------------------------------------------------------------- II. Provisions of Proposed Regulation (Sec. Sec. 403.1200, 403.1201, 403.1202, 403.1203, and 403.1204) As discussed at length above, we are proposing this regulation 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 not only their out-of-pocket costs, but also unreasonable Medicare and Medicaid expenditures, both of which are significant problems. Keeping these principles in mind, we are proposing to amend subchapter A, part 403 by adding a new subpart L. Proposed Sec. 403.1202 sets forth the requirement that advertisements for certain prescription drug or biological products on television (including broadcast, cable, streaming, and satellite), must 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, 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.'' 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 Wholesale Acquisition Cost is certain to be known by the manufacturer when creating DTC ads. The price stated in the advertisement must be current as of the date of publication or broadcast. This provision would specify that where the price is related to the ``typical course of treatment,'' and the course of treatment varies depending on the indication for which the drug is prescribed, the list price used should be the one for the ``course of treatment'' associated with the primary indication addressed in the advertisement. To the extent permissible under current laws, manufacturers would be permitted to include an up-to-date competitor product's list price, so long as they do so in a truthful, non-misleading way. In Sec. 403.1200(b) we are proposing an exception to the requirement at proposed Sec. 403.1202(a) to provide that an advertisement for any prescription drug or biological product and that has a list price, as defined herein, of less than $35 per month for a 30-day supply or typical course of treatment will be exempt from these transparency requirements. We are also proposing that Sec. 403.1200 set forth the scope of applicability to specify that this requirement will apply to any advertisement 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. We are further proposing in Sec. 403.1203 that the required price disclosure set forth in proposed Sec. 403.1202 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. We seek 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. We are proposing in Sec. 403.1204(a) that the Secretary shall 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 is proposed in this rule. However, we anticipate that the primary enforcement mechanism will be the threat of private actions under the Lanham Act Section 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 seek 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 including any HHS-specific enforcement mechanism in this proposal, we are proposing at Sec. 403.1204(b) that this rule preempt any state-law-based claim which depends in whole or in part on any pricing statement required by this rule. In publishing this proposed rule, we are seeking comment on the specifics of the proposal. In particular, we seek comment on whether Wholesale Acquisition Cost is the amount that best reflects the ``list price'' for the stated purposes of price transparency and comparison shopping under this proposed regulation. We also seek comment on whether 30-day supply and typical course of treatment are [[Page 52795]] appropriate metrics for a consumer to gauge the cost of the drug. We further seek comment on how to treat an advertised drug that must be used in combination with another non-advertised drug or device. We also seek 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. This threshold was selected because it approximates the average copayment for a preferred brand drug. Given that the public is already accustomed to pay roughly this amount for drugs--and thus, in the absence of new information, may presume that patients will pay this amount for a drug--the public's interest in being informed of prices that are equal to or less than this amount is less strong than for prices in excess of this amount. 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. These prices are also well below the lowest list price of advertised drugs. We seek 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. We also seek comment on the content of the proposed pricing information statement as described herein, including whether other specifications should be incorporated. For example, we seek 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. We considered whether this regulation should apply to advertisements that are in other media forums such as radio, magazines, newspapers, internet websites and other forms of social media, but concluded that the purpose of this regulation is best served by limiting the requirements to only those identified herein. We seek comment as to whether we should apply this regulation to other media formats and, if so, what the presentation requirements should be. We further seek comment as to whether compliance with this rule should be a condition of payment, directly or indirectly, from these federal health programs. We are also considering 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 out-of-pocket costs but also expenditures borne by Medicare and Medicaid. We seek 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) Kan enhanced CMS drug pricing dashboard, (2) a new payment code for drug pricing counseling, and (3) intelligent plan selection or use of intelligent assignment. We are also interested in other approaches to price transparency and informed decision making that we have not contemplated. CMS has released several information products that provide greater transparency on spending for drugs in the Medicare and Medicaid programs. The CMS Drug Spending Dashboards are interactive, web-based tools that provide spending information for drugs in the Medicare Part B and D programs as well as Medicaid. The Dashboards focus on average spending per dosage unit and change in average spending per dosage unit over time. The tools also include additional manufacturer-level drug spending information as well as consumer-friendly descriptions of the drug uses and clinical indications. We seek comment on whether manufacturers or others submitting additional information such as list price, typical out-of-pocket cost, therapeutic alternatives, pharmacoeconomic research, and other data could be helpful for consumers and what information would be most useful. We are also interested in feedback about the ease of which CMS dashboard data could be used by a non-government entity creating and maintaining such a price transparency resource for consumers and others. Additionally, CMS could announce updated information when a new DTC ad campaign is launched and public service announcements could be made to draw attention to the dashboard. In an effort to incentivize provider engagement with patients on their prescription drug out-of-pocket 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 out-of-pocket costs, thus improving adherence, but also could increase provider awareness of drug pricing which may influence prescribing when appropriate cheaper options are available. Through intelligent plan selection or use of intelligent assignment, beneficiaries could be provided with an auto-generated list of plans each year, based upon their most recent drug utilization, that would highlight opportunities for savings though competitor plans or alternative drugs (e.g., generics or biosimilars). This intelligent plan selection would help alleviate beneficiary anxiety associated with plan selection and encourage annual plan review by beneficiaries. Enrollment in suggested plans would be voluntary. III. Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our estimate of the information collection burden. The quality, utility, and clarity of the information to be collected. Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In this proposed rule, we are soliciting public comment on the issues in this document that contain information collection requirements (ICRs). 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 (http://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 52796]] Table F1--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 $18.24 $36.48 Marketing Managers.............................................. 11-2021 63.57 127.14 ---------------------------------------------------------------------------------------------------------------- As indicated, we are adjusting our employee hourly wage estimates by a factor of 100 percent. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and because methods of estimating these costs vary widely from study to study. Nonetheless, there is no practical alternative and we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method. B. ICRs Regarding Pricing Information (Sec. 403.1202) Proposed Sec. 403.1202 would require 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 earlier in Section II of this notice of proposed rulemaking, 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 ads that appear on television each quarter and will be affected by this rule. For these ads, 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 $24.08 ($34.48/hr x .66) per advertisement for administrative support staff. We also estimate 5 minutes and $41.96 ($127.14/hr x .33) per advertisement for marketing managers, for a total of 15 minutes (0.25 hours) and $66.04 ($24.08 + $41.96) 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 1, we estimate costs of $19,812 (300 ads x $66.04/ad) per quarter or $79,248 in each year following publication of the final rule after adjusting for overhead and benefits. C. Submission of PRA-Related Comments We have submitted a copy of this proposed rule to OMB for its review of the rule's information collection and recordkeeping requirements. These requirements are not effective until they have been approved by the OMB. To obtain copies of the supporting statement and any related forms for the proposed collections discussed above, please visit CMS' website at website address at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html or call the Reports Clearance Office at 410-786-1326. We invite public comments on these potential information collection requirements. If you wish to comment, please submit your comments electronically as specified in the ADDRESSES section of this proposed rule and identify the rule (CMS-4187-P) and where applicable the ICR's CFR citation, CMS ID number, and OMB control number. See the DATES and ADDRESSES sections of this proposed rule for further information. IV. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. V. Regulatory Impact Analysis A. Statement of Need This proposed rule aims to improve the quality, accessibility and affordability of the Medicare Part C and Part D 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. This proposal will require disclosure of prescription drug prices to the general public for products advertised on television. This may improve awareness and allow the general public to respond, potentially increasing the efficiency of prescription drug utilization. B. Overall Impact We acknowledge that examination of the impact of this proposed 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., Pub. L. 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 businesses, 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. In addition, section 1102(b) of the Act requires us to prepare a regulatory analysis for any rule or regulation proposed under Title XVIII, Title XIX, [[Page 52797]] or Part B of the Act that may have significant impact on the operations of a substantial number 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 $150 million. This proposed rule is not anticipated to have an effect only on State, local, or tribal governments, in the aggregate, of $150 million or more, adjusted for inflation. We believe that the proposed rule would impose mandates on the private sector that would result in an expenditure of $150 million in at least one year. 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 proposed 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. Executive Order 13771 (January 30, 2017) requires that the costs associated with significant new regulations ``to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.'' The Department believes that this proposed rule is a significant regulatory action as defined by Executive Order 12866 which imposes costs, and therefore is considered a regulatory action under Executive Order 13771. C. Anticipated Effects This proposed rule would affect the operations of prescription drug manufacturers. According to the U.S. Census, there were 1,775 pharmaceutical and medicine manufacturing firms operating in the U.S. in 2015.\16\ 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 proposed rule using the May 2016 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 below. --------------------------------------------------------------------------- \16\ https://www.census.gov/data/tables/2015/econ/susb/2015-susb-annual.html. Table 1--Hourly Wages ------------------------------------------------------------------------ ------------------------------------------------------------------------ Marketing and Sales Managers................................... $66.52 Lawyers........................................................ 67.25 Office and Administrative Support Occupations.................. 17.91 ------------------------------------------------------------------------ In order to comply with the regulatory changes proposed in this proposed rule, affected businesses would first need to review the rule. We estimate that this would require an average of 2 hours for affected businesses to review, divided evenly between marketing managers and lawyers, in the first year following publication of the final rule. As a result, using wage information provided in Table 1, this implies costs of $0.47 million in the first year following publication of a final rule after adjusting for overhead and benefits. After reviewing the rule, prescription drug 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 1, we estimate costs of $4.74 million in the first year and $2.36 million in subsequent years following publication of the final rule after adjusting for overhead and benefits. We estimate that 25 pharmaceutical companies will run an estimated 300 distinct pharmaceutical ads that appear on television each quarter and will be affected by this rule. For these ads, 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 $24.08 ($34.48/hr x .66) per advertisement for administrative support staff. We also estimate 5 minutes and $41.96 ($127.14/hr x .33) per advertisement for marketing managers, for a total of 15 minutes (0.25 hours) and $66.04 ($24.08 + $41.96) 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 1, we estimate costs of $19,812 (300 ads x $66.04/ad) per quarter or $79,248 in each year following publication of the final rule after adjusting for overhead and benefits. 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 market 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 [[Page 52798]] potentially increase total cost of care. We lack data to quantify these effects, and seek public comment on these impacts, including comment on the best methods for extrapolating, to the prescription drug market, estimates of consumer response to the inclusion of prices in advertising that may have been developed in other contexts. In addition, we believe that this rule may provide a moderating force to counteract prescription drug increases. This rule will provide direct evidence of prescription drug prices to the general public, potentially improving awareness and allowing the general public to signal in some cases that prescription drug 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. We lack data to quantify these effects, and seek public comment on these impacts. 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, the set of pharmaceutical products available for sale, and utilization of various prescription drugs. A possibility not reflected in the quantitative estimates above is that, with this proposed rule, drug companies would find the cost of revising their ads to be prohibitively expensive (for example, if they change their WACs so frequently that there is extensive monitoring and revision necessary to ensure that ads airing on a particular day match the WAC for that day). In this case, TV drug 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 ads to align with quarterly marketing plans. We therefore request comment 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 payers? Furthermore, the Department recognizes that some studies indicate direct-to-consumer advertising increases disease awareness, and that if this rule decreases disease awareness such that untreated illness occurs, there may be other impacts. We lack data to quantify the effects of this rule along these dimensions, and we seek public comment on these impacts. In addition, we acknowledge that we may not have considered all areas in which the rule may have effects, and we seek public comment on impacts of the rule in areas we have not discussed here. As discussed above, the RFA requires agencies that issue a regulation to analyze options for regulatory relief of small entities if a proposed rule has a significant impact on a substantial number of small entities. HHS considers a rule to have a significant economic impact on a substantial number of small entities if at least 5 percent of small entities experience an impact of more than 3 percent of revenue. As discussed below, we calculate the costs of the proposed changes per affected business over 2020-2024. The estimated average 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 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 costs of this proposed rule are a tiny fraction of payroll for covered entities, the Department anticipates that the proposed rule will not have a significant economic impact on a substantial number of small entities. We seek public comment on this determination, and the rule's impact on small entities. 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. If an alternative definition were used for list price, 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 Wholesale Acquisition Cost is certain to be known by the manufacturer when creating DTC ads. 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. We seek comments on these regulatory alternatives. E. Accounting Statement [[Page 52799]] Table 2--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 Benefits: 2016 dollars) (millions of 2016 dollars) --------------------------------------------------------------- 3 Percent 7 Percent 3 Percent 7 Percent ---------------------------------------------------------------------------------------------------------------- Quantified Benefits............................. 0 0 0 0 ---------------------------------------------------------------------------------------------------------------- Non-quantified Benefits: Improved transparency for prescription drug and biological product prices. ---------------------------------------------------------------------------------------------------------------- Costs: 3 Percent 7 Percent 3 Percent 7 Percent ---------------------------------------------------------------------------------------------------------------- Quantified Costs................................ 12.1 9.4 2.6 2.3 ---------------------------------------------------------------------------------------------------------------- Non-quantified Costs: See narrative discussion. ---------------------------------------------------------------------------------------------------------------- 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 proposes to amend 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. Add subpart L 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. 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. (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 drug or biological, the manufacturer's list price for the drug or biological 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 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 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 course of treatment varies depending on the indication for which a drug is prescribed, the list price to be used is the one for the ``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 shall maintain a public list that will include the 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 that depends in whole or in part on any pricing statement required by this subpart. Dated: October 11, 2018. Seema Verma, Administrator, Centers for Medicare & Medicaid Services. Dated: October 11, 2018. Alex M. Azar II, Secretary, Department of Health and Human Services. [FR Doc. 2018-22698 Filed 10-15-18; 4:15 pm] BILLING CODE 4120-01-P
![Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules 52789
pyraflufen-ethyl, ethyl 2-[2-chloro-5-(4- DEPARTMENT OF HEALTH AND Please allow sufficient time for mailed
chloro-5-difluoromethoxy)-1-methyl-1H- HUMAN SERVICES comments to be received before the
pyrazol-3-yl]-4-fluorophenoxy] acetate, close of the comment period.
and its acid metabolite, E–1, 2-chloro-5- Centers for Medicare & Medicaid 3. By express or overnight mail. You
(4-chloro-5-difluoromethoxy-1-methyl- Services may send written comments to the
1H-pyrazol-3-yl)-4-fluorophenoxyacetic following address ONLY: Centers for
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the following RACs: Cottonseed
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dried cones at 0.02 ppm; nut, tree, group Transparency
FOR FURTHER INFORMATION CONTACT:
14–12 at 0.01 ppm; tropical and AGENCY: Centers for Medicare & Cheri Rice, (410) 786–6499.
subtropical, small fruit, edible peel, Medicaid Services (CMS), HHS. SUPPLEMENTARY INFORMATION: Inspection
subgroup 23A at 0.01 ppm; and ACTION: Proposed rule. of Public Comments: All comments
vegetable, tuberous and corm, subgroup received before the close of the
1C at 0.02 ppm. Available analytical SUMMARY: This proposed rule would comment period are available for
methodology involves multiple-step revise the Federal Health Insurance viewing by the public, including any
extractions of the chemical residues Programs for the Aged and Disabled by personally identifiable or confidential
from plants and using Gas amending the Medicare Parts A, B, C business information that is included in
Chromatograph-Mass Spectrometry and D programs, as well as the Medicaid a comment. We post all comments
(GC–MS) to measure and evaluate program, to require direct-to-consumer received before the close of the
pyraflufen-ethyl residues. Contact: RD. (DTC) television advertisements of comment period on the following
prescription drugs and biological website as soon as possible after they
2. PP 8E8689. (EPA–HQ–OPP–2018–
products for which payment is available have been received: http://
0560). IR–4, Rutgers, The State
through or under Medicare or Medicaid www.regulations.gov. Follow the search
University of New Jersey, 500 College to include the Wholesale Acquisition
Road East, Suite 201W, Princeton, NJ instructions on that website to view
Cost (WAC, or ‘‘list price’’) of that drug public comments.
08540, requests to establish tolerances or biological product. We are proposing
in 40 CFR part 180.553 for residues of this regulation to improve the efficient I. Background
the fungicide fenhexamid (N–2,3- administration of the Medicare and A. Purpose
dichloro-4-hydroxyphenyl)-1-methyl Medicaid programs by ensuring that
cyclohexanecarboxamide in or on the The purpose of this proposed rule is
beneficiaries are provided with relevant
raw agricultural commodities: Arugula to reduce the price to consumers of
information about the costs of
at 30.0 ppm; berry, low growing, prescription drugs and biological
prescription drugs and biological
products. This rule would require
subgroup 13–07G at 3.0 ppm; bushberry products so they can make informed
direct-to-consumer (DTC) television
subgroup 13–07B at 5.0 ppm; caneberry decisions that minimize not only their
advertisements for prescription drug
subgroup 13–07A at 20.0 ppm; fruit, out-of-pocket costs, but also
and biological products for which
small, vine climbing, except fuzzy expenditures borne by Medicare and
reimbursement is available, directly or
kiwifruit, subgroup 13–07F at 4.0 ppm; Medicaid, both of which are significant
indirectly, through or under Medicare or
fruit, stone, group 12–12, except plum, problems.
Medicaid to include the list price of that
prune, fresh, postharvest at 10.0 ppm; DATES: To be assured consideration, product. We are proposing this
garden cress at 30.0 ppm; kiwifruit, comments must be received at one of regulation to improve the efficient
fuzzy at 30.0 ppm; leafy greens the addresses provided below, no later administration of the Medicare and
subgroup 4–16A, except spinach at 30.0 than 5 p.m. on December 17, 2018. Medicaid programs by ensuring that
ppm; onion, bulb, subgroup 3–07A at ADDRESSES: In commenting, please refer beneficiaries are provided with relevant
2.0 ppm; onion, green, subgroup 3–07B to file code CMS–4187–P. Because of information about the costs of
at 30.0 ppm; upland cress at 30.0 ppm; staff and resource limitations, we cannot prescription drugs and biological
and vegetable, fruiting, group 8–10, accept comments by facsimile (FAX) products so they can make informed
except nonbell pepper at 2.0 ppm. The transmission. Comments, including decisions that minimize not only their
‘‘Method for the Determination of KBR mass comment submissions, must be out-of-pocket costs, but also
2738 (TM–402) Residues in Plant submitted in one of the following three unreasonable expenditures borne by
Material by HPLC’’ is used to measure ways (please choose only one of the Medicare and Medicaid, both of which
and evaluate the chemical fenhexamid. ways listed): are significant problems.
Contact: RD. 1. Electronically. You may submit Markets operate more efficiently
electronic comments on this regulation when consumers have relevant
Authority: 21 U.S.C. 346a. to http://www.regulations.gov. Follow information about a product, including
khammond on DSK30JT082PROD with PROPOSAL
Dated: October 1, 2018. the ‘‘Submit a comment’’ instructions. its price, as well as alternative products
Delores Barber, 2. By regular mail. You may mail and their prices, before making an
Director, Information Technology and
written comments to the following informed decision whether to buy that
Resources Management Division, Office of address ONLY: Centers for Medicare & product or, instead, a competing one.
Pesticide Programs. Medicaid Services, Department of Consumers price shop when looking to
[FR Doc. 2018–22659 Filed 10–17–18; 8:45 am]
Health and Human Services, Attention: purchase a new car, a new house, or
CMS–4187–P, P.O. Box 8013, Baltimore, even a new coffee maker. Price
BILLING CODE 6560–50–P
MD 21244–8013. shopping is the mark of rational
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![52790 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules
economic behavior. To facilitate price designs, even though the PBM may have This proposed rule seeks to fill this
shopping, sellers invariably provide negotiated a lower price for the product informational gap by adding a new
potential buyers with the prices of their dispensed to the beneficiary. First, in subpart L to part 403 to title 42 that
products; consumers gauge the the commercial market, over 40% of would require that for prescription drug
reasonableness of these prices against beneficiaries are in high deductible and biological products that can be
alternatives. Even automobile plans. Under such plans, beneficiaries reimbursed directly or indirectly
dealerships, as result of federal law, pay the full list price of the product through or under Medicare or Medicaid,
post the retail or ‘‘sticker’’ price on the until they meet their deductible, which DTC ads on television (including
side window of each new car offered for can be thousands of dollars. Second, broadcast, cable, streaming, and satellite
sale. benefit designs are built off of list price, communication) for such products must
That has not been the case with because the negotiated rebate rate is not include the product’s current list price,
prescription drugs or biological paid until months after the product was defined as the Wholesale Acquisition
products, where consumers often need dispensed. Third, co-insurance has Cost.3 CMS is proposing this rule in the
to make decisions without information become a standard payor mechanism context of broadcast advertisements, an
about a product’s price. Price applicable to high cost drugs, requiring area in which the Supreme Court
transparency is a necessary element of the patient to pay a percentage of the list historically has recognized that the
an efficient market that allows price. All of the top 10 PDPs use government may take special steps to
consumers to make informed decisions coinsurance rather than fixed dollar help ensure that viewers receive
when presented with relevant copayments for medications on appropriate information. See Red Lion
information, but for consumers of nonpreferred drug tiers, charging 30 Broad. Co. v. FCC, 395 U.S. 367, 390,
prescription drugs, including those percent to 50 percent of each 394 (1969) (‘‘It is the right of the viewers
whose drugs are covered through prescription’s full price in 2017.1 and listeners, not the right of the
Medicare or Medicaid, both the list Finally, very few drugs have coverage broadcasters, which is paramount.’’).
price and actual price to the consumer on all the formularies in the country. If
remain hard to find. Third-party B. Legal Authority
a plan does not cover a particular drug
payment, a dominant feature of health requested by a patient, then the patient HHS recognizes that ‘‘an
care markets, is not a prominent feature may have to pay the full list price to administrative agency’s power to
of other markets and causes distortions, access the medication. regulate . . . must always be grounded
such as an absence of meaningful prices Due at least in part to the market- in a valid grant of authority from
and the information and incentives that distorting effects of third-party payors, Congress.’’ Food & Drug Admin. v.
prices provide. In many cases pharmaceutical manufacturers tend not Brown & Williamson Tobacco Corp., 529
prescription drug coverage is provided to compete based on list price, and U.S. 120, 161 (2000). Thus, in proposing
by an employer to its employees, or by hence there is little to no market new regulations HHS must pay close
the federal government to Medicare and pressure voluntarily to disclose a attention to the text and structure of the
Medicaid beneficiaries. These entities product’s list price. Not only does legislation granting an agency authority.
providing prescription drug coverage transparency promote a more ‘‘Agencies are . . . ‘bound, not only by
are known as payors. competitive environment, but data the ultimate purposes Congress has
List price plays a role in negotiations indicate that it will likely motivate selected, but by the means it has
between payors, Pharmacy Benefit manufacturers to be less willing to raise deemed appropriate, and prescribed, for
Managers (PBMs), and manufacturers, prices, which have dramatically the pursuit of those purposes.’’’
which all impact beneficiary cost increased over the past decade. See, e.g., Colorado River Indian Tribes v. Nat’l
sharing. Payors hire third party John F. Cady, ‘‘An Estimate of the Price Indian Gaming Comm’n, 466 F.3d 134,
providers such as PBMs to manage the Effects of Restrictions on Drug 139–40 (D.C. Cir. 2006) (quoting MCI
payor’s prescription drug benefit for the Advertising,’’ 44 Economic Inquiry, Telecomms. Corp. v. AT&T, 512 U.S.
payor’s employees and negotiate 493–510 (Dec. 1976) (finding that 218, 231 n.4, (1994)). This proposed rule
improved drug pricing for medications is issued pursuant to sections 1102 and
prescription drug prices were 4.3%
based on the level of utilization 1871 of the Social Security Act. Section
higher on average in states restricting
management a payor is willing to apply 1102(a) of the Social Security Act
advertising of prices than in states
to the benefit. Prescription drug benefit authorizes the Secretary to issue ‘‘such
allowing such advertising.). While study
designs are typically based on the rules and regulations, not inconsistent
results vary depending on the design,
manufacturer’s list price, however, in with this Act, as may be necessary to the
the population studied, and product at
many cases the PBM can negotiate a efficient administration of the functions
issue, according to the Congressional
lower price than a manufacturer’s list . . . under this Act[,].’’ The Secretary
Research Service
price if there is high deductible plans, has ‘‘broad rule-making authority’’
copay or coinsurance, formulary either [m]ost research suggests that when better under section 1102, for both Medicare
tiered or closed, utilization management price information is available prices for and Medicaid. See, e.g., Thorpe v.
goods sold to consumers fall. The largest and Housing Authority of City of Durham,
including step therapy and prior
most straightforward body of evidence relates
authorizations. The willingness of a to the effect of advertising, where nearly all 393 U.S. 268, 277 n.28 (1969). Under
payor to apply varying degrees of research indicates advertising prices is Section 1871(a), which instructs ‘‘[t]he
utilization control impacts savings for associated with lower prices. This reduction Secretary [to] prescribe such regulations
each individual payor and beneficiary. in prices suggests that advertising’s increased as may be necessary to carry out the
khammond on DSK30JT082PROD with PROPOSAL
A PBM could have ten different clients information on prices and increases in administration of the insurance
with ten different benefit designs and it competition outweigh any tendency to programs under this title [XVIII],’’ the
would be possible that an employee increase prices through increasing demand
and brand identification.2
from each client could get the exact Implications of Empirical Evidence in Other
same product and all ten could pay a Markets for the Health Sector, CRS Report 46 (July
1 MEDPAC Report to the Congress: Medicare 24, 2007).
different price. Payment Policy. March 2017. 383. 3 Over-the-counter drugs covered by Medicaid, to
A number of factors make list price 2 D. Andrew Austin and Jane G. Gravelle, ‘‘Does the extent that they cost more than $35 per month,
relevant across a variety of drug benefit Price Transparency Improve Market Efficiency? are not within the scope of this rule.
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![Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules 52791
Secretary similarly possesses broad Part A’s prospective payment system about $457 billion in 2015, or 16.7
rulemaking authority with respect to the (authorized by Sections 1814, 1886 of percent of overall personal health care
Medicare program. See, e.g., Cottage the Act). The Medicaid drug benefit is services. Of that $457 billion, $328
Health Sys. v. Sebelius, 631 F. Supp. 2d authorized by sections 1902(a)(54) and billion (71.9 percent) was for retail
80, 92 (D.D.C. 2009). Rules issued under 1905(a)(12). drugs and $128 billion (28.1 percent)
such broad rulemaking authorities must The Secretary has determined that the was for non-retail drugs. Factors
be ‘‘sustained so long as [they are] proposed regulation is necessary to the underlying the rise in prescription drug
‘reasonably related to the purposes of efficient administration of the Medicare spending from 2010 to 2014 can be
the enabling legislation.’ ’’ and do not and Medicaid programs. The Secretary roughly allocated as follows: 10 percent
contradict or undermine that legislation. has an obligation to ensure the wise of that rise was due to population
Mourning v. Family Publ’ns Servs., Inc., expenditure of federal trust fund growth; 30 percent to an increase in
411 U.S. 356, 369 (1973) (quoting dollars, and may promulgate regulations prescriptions per person; 30 percent to
Thorpe, 393 U.S. at 280–81). to advance these goals. See, e.g., Sid overall, economy-wide inflation; and 30
HHS has concluded that the proposed Peterson Mem’l Hosp. v. Thompson, 274 percent to either changes in the
rule has a clear nexus to the Social F.3d 301, 313 (5th Cir. 2001); see also composition of drugs prescribed toward
Security Act. In numerous places in the 42 U.S.C. 1395i (Medicare Part A trust higher price products or price increases
Act, Congress recognized the fund); 42 U.S.C. 1395t (Medicare Parts for drugs that together drove average
importance of administering the B and D trust fund). Efficient price increases in excess of general
Medicare and Medicaid programs in a administration of both Medicare and inflation.4
manner that minimizes unreasonable Medicaid encompasses federal efforts to Manufacturers of prescription drugs
expenditures. See, e.g., Sections achieve good value for funds spent in in competitive classes often offer price
1842(b)(8) and (9), 1860D–4(c)(3), the Medicare and Medicaid programs. concessions in the form of rebates that
1860D–4(c)(5)(H), 1866(j)(2)(A), 1893(g), Toward that end, the agency has issued are paid after the prescription is filled.
1902(a)(64), 1902(a)(65), 1936(b)(2). In regulations that promote the responsible Manufacturer rebates have grown
addition, Congress recognized the value use of federal funds. See, e.g., 42 CFR approximately 10% of gross Part D drug
of disclosures about drug prices. In part 413, subpart C (limitations on costs in 2008 to 20% of gross Part D
section 1927(b)(3)(A) of the Act, reasonable cost reimbursement), drug costs in 2016. The CMS Office of
manufacturers with Part B rebate § 421.122 (oversight of contractors), the Actuary projects rebates will exceed
agreements must disclose pricing § 424.5 (conditions for payment), § 438.4 28% of gross Part D drug costs over the
information to the government, et seq. (actuarial soundness of capitation next ten years.5
including the average manufacturer rates). Nonetheless, the cost to the Because the list price of a drug does
price, the manufacturer’s average sales federal government, Medicare not reflect manufacturer rebates paid to
price, and at times the manufacturer’s beneficiaries, and State Medicaid a PBM, insurer, health plan, or
wholesale acquisition cost as well as the programs of prescription drugs and government program, obscuring these
manufacturer’s best price for certain biological products has been increasing discounts can shift costs to consumers
drugs. And in the Part D program, at an alarming rate due both to in commercial health plans and
section 1860(k)(1) compels certain increasing prices and increasing Medicare beneficiaries. Many incentives
sponsors offering prescription drug utilization. See, e.g., https:// in the current system reward higher list
plans to disclose the difference between www.cms.gov/Research-Statistics-Data- prices, all participants in the chain of
the price of a dispensed drug and the and-Systems/Statistics-Trends-and- distribution, e.g., manufacturers,
price of the lowest priced generic Reports/Information-on-Prescription- wholesalers, pharmacy benefit
available that is therapeutically Drugs/. As discussed further below, managers, and even private insurers,
equivalent and bioequivalent. This rule DTC advertising without price gain as the list price of any given drug
uses means that Congress has generally transparency has a direct nexus to these increases. These financial gains come at
endorsed—disclosures about drug trends of increasing price and the expense of increased costs to
prices—to advance an end that Congress utilization. This proposed regulation patients and public payors, such as
endorsed—minimizing unreasonable combats these trends by ensuring that Medicare and Medicaid, which
expenditures—and thus there is a clear beneficiaries are provided with relevant ultimately fall on the backs of American
nexus between HHS’s proposed actions information about the costs of taxpayers.
and the Act. prescription drugs and biological Furthermore, consumers who have
In addition, although Congress has products, so they can make informed not met their deductible or are subject
not explicitly provided HHS with decisions. Based on a combination of all to coinsurance, pay based on the
authority to compel the disclosure of list of these reasons, the Act authorizes HHS pharmacy list price, which is not
prices to the public, Congress has to issue this proposed rule. reduced by the substantial drug
explicitly directed HHS to operate manufacturer rebates paid to PBMs and
Medicare and Medicaid programs C. The Cost of Prescription health plans. As a result, the growth in
efficiently. Promoting pricing Pharmaceuticals to Medicare and list prices, and the widening gap
transparency, and thus efficient Medicaid and Their Beneficiaries Has between list and net prices, markedly
markets, for drugs funded through those Been Rising Annually increases consumer out-of-pocket
programs falls within the scope of that The cost of drugs and biological spending, particularly for high-cost
mandate. Drugs and biological products products over the past decade has drugs not subject to negotiation.
khammond on DSK30JT082PROD with PROPOSAL
are covered under the Medicare Part B increased dramatically, and are The Centers for Medicare & Medicaid
benefit (authorized by various projected to continue to rise faster than Services (CMS) is the single largest drug
provisions including sections 1832, overall health spending, thereby
1861(s)(2) of the Social Security Act (the increasing this sector’s share of health 4 ASPE Issue Brief. Observations on Trends in
Act)), the Medicare Part D benefit care spending. The HHS Office of the Prescription Drug Spending. March 8, 2016.
5 2018 ANNUAL REPORT OF THE BOARDS OF
(authorized by section 1860D–1 et seq. Assistant Secretary for Planning and TRUSTEES OF THE FEDERAL HOSPITAL
of the Act), and as part of hospital Evaluation estimates that prescription INSURANCE AND FEDERAL SUPPLEMENTARY
inpatient admissions under Medicare drug spending in the United States was MEDICAL INSURANCE TRUST FUNDS.
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![52792 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules
payor in the nation. In 2016, CMS and between 2009 and 2013 was accounted DTC advertising appears to directly
its beneficiaries spent $174 billion on for by price growth, which reflects affect drug utilization.12 Studies show
drugs covered under Parts B and D, and increased prices for existing products how consumers exposed to drug
$64 billion on drugs covered under and shifts in the mix of drugs, including advertisements can exert sufficient
Medicaid. An additional sum was spent the adoption of new drugs.9 Medicaid pressure on their physicians to prescribe
on drugs furnished by hospitals under drug spending grew 25% in 2015 and the advertised product.13 In one recent
Part A’s inpatient prospective payment 13% in 2015.10 survey, one in eight adults (12%) said
system, but the precise amount is they were prescribed a specific drug
Price transparency will help improve
difficult to isolate because hospitals after asking a doctor about it as a result
the efficiency of Medicare and Medicaid
receive a single payment for all non- of seeing or hearing an advertisement.14
programs by reducing wasteful and
physician services provided during an When manufacturers direct their DTC
abusive increases in drug and biological advertising to consumers, such
inpatient stay (including drugs). In
list prices—spiraling drug costs that are messaging can help facilitate more
2016, CMS and its beneficiaries spent
then passed on to federal healthcare informed discussions between
more than $238 billion on prescription
drugs, approximately 53 percent of the program beneficiaries and American consumers and their health care
$448.2 billion spent on retail and non- taxpayers more broadly. First, it will providers in making decisions about
retail prescription drugs in the United provide manufacturers with an treatment. But it can also result in
States that year. Each year overall incentive to reduce their list prices by increased utilization through patients
expenditures on drugs by both the exposing overly costly drugs to public demanding costly drugs and biological
Medicare and Medicaid programs and scrutiny. Second, it will provide some products based on advertising
their beneficiaries have increased at consumers with more information to messaging, with a resulting increase in
rates greater than inflation both in the better position them as active and well- government spending—a problem if less
aggregate and on a per beneficiary basis. informed participants in their health costly alternatives are available, or
For Part D, according to the 2018 care decision-making. As discussed would be available through market
Trustees’ Report, CMS’s costs have further below, consumers make a series pressures resulting from greater price
grown, of critical health care decisions related transparency.
to their treatment with prescription To have the necessary information in
[o]ver the past 10 years, Part D benefit
payments have increased by an annual rate drugs, and the list price of those drugs making critical decisions related to
of 7.4 percent in aggregate and by 3.8 percent may be informative to those decisions. prescription drugs, consumers need
on a per enrollee basis. These results reflect Even where the consumer may be some idea of the magnitude of the cost
the rapid growth in enrollment, together with insured, and therefore will be paying of the advertised drug. More informed
multiple prescription drug cost and substantially less than the list price, the consumer decision making will impact
utilization trends that have varying effects on coinsurance borne by some consumers not only each individual beneficiary’s
underlying costs. For example, there has will necessarily increase as the prices own finances, but also positively affect
been a substantial increase in the proportion the shared taxpayer responsibility to
of prescriptions filled with low—cost generic negotiated by PBMs increase.
drugs that has helped constrain cost growth,
fund the Medicare and Medicaid drug
D. Direct-to-Consumer Advertising and benefit programs.
while there has also been a significant
Its Role, in Part, in Fueling the Demand
increase in the cost of specialty drugs that E. Transparency in Drug Pricing
has increased cost growth.6 for Higher Cost Drugs
Promotes Lower Prices and More
In other words, the per beneficiary Prescription drugs, by definition, Informed Purchasing by Beneficiaries
cost of drugs through Part D has cannot be accessed directly by the Both Titles XVIII and XIX of the Act
increased nearly 40% over the past consumer; they must be prescribed by a reflect the importance of administering
decade, while the consumer price index licensed health care practitioner. We the Medicare and Medicaid programs in
has increased only 19% during this know, however, that consumers are a manner that minimizes unreasonable
same period.7 responsible for critical choices related to expenditures. See, e.g., Sections
Over the period 2013–2016, Medicare their treatment with prescription drugs. 1842(b)(8) and (9), 1860D–4(c)(3),
Parts D and B, and Medicaid For example, consumers decide whether 1860D–4(c)(5)(H), 1866(j)(2)(A), 1893(g),
expenditures on a per beneficiary basis to make the initial appointment with a 1902(a)(64), 1902(a)(65), 1936(b)(2). In
increased by 22%, 32%, and 42% physician; whether to ask the physician order to enable consumers to make good
respectively. Drug price inflation about a particular drug or drugs; health care choices, which will in turn
accounts for some of this growth. whether to fill a prescription; whether improve the efficiency of the Medicare
Between 2006 and 2015, Part D brand to take the drug; and whether to and Medicaid programs, it is critical
drug prices rose by an average 66% continue taking it in adherence to the that they understand the costs
cumulatively.8 Since 2009, Medicare prescribed regimen. Drug associated with various medications.
Part B drug spending grew at an average manufacturers, therefore, spend billions This is especially important where
rate of about 9% per year. About half of of dollars annually promoting their
the growth in Part B drug spending prescription drugs directly to consumers 12 Dhaval Dave & Henry Saffer, Impact of Direct-
through television advertisements and to-Consumer Advertising on Pharmaceutical Prices
6 2018 Annual Report of the Boards of Trustees and Demand, 79 Southern Economic Journal 97–
of the Federal Hospital Insurance and Federal other media. In 2017, over $5.5 billion 126 (2012); Balaji Datti & Mary W. Carter, The Effect
was spent on prescription drug
khammond on DSK30JT082PROD with PROPOSAL
Supplementary Medical Insurance Trust Funds at of Direct-to-Consumer Advertising on Prescription
106, available at https://www.cms.gov/Research- advertising, including nearly $4.2 Drug Use by Older Adults, 23 Drugs Aging 71–81
Statistics-Data-and-Systems/Statistics-Trends-and- billion on television advertising.11 (2006).
Reports/ReportsTrustFunds/Downloads/ 13 Barbara Mintzes et al., Influence of direct to
TR2018.pdf. consumer pharmaceutical advertising and patients’
7 https://data.bls.gov/pdq/SurveyOutput 9 MEDPAC. Report to the Congress: Medicare and
requests on prescribing decisions: Two site cross
Servlet?request_action=wh&graph_name=CU_ the Health Care Delivery System. June 2017. 37. sectional survey, 324 The BMJ 278–79 (2002).
cpibrief. 10 CMS National Health Expenditure Data. 2016. 14 Kaiser Health Tracking Poll (October 2015)
8 MEDPAC. Report to the Congress: Medicare 11 Kantar Media Advertising Intelligence—2013 to https://www.kff.org/health-costs/poll-finding/
Payment Policy. March 2018. 415. 2017 Prescription Medications Ad Spend Data. kaiser-health-tracking-poll-october-2015/.
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![Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules 52793
consumers have cost sharing obligations consistent with First Amendment justified disclosure of financial interests
that may be significant. jurisprudence. Rules, such as this one, of pharmacy benefit managers); N.Y.
As discussed above, DTC that require certain factual commercial State Rest. Ass’n v. N.Y. City Bd. of
advertisements that do not provide disclosures pass muster under the First Health, 556 F.3d 114, 134 (2d Cir. 2009)
pricing information may contribute to Amendment where the disclosure (recognizing that the government
rising drug prices and rising premiums. advances a government interest and interest in ‘‘promot[ing] informed
Consumers of pharmaceuticals are does not unduly burden speech. consumer decision-making’’ justified
currently missing information that When the government requires posting of calories on menus in chain
consumers of other products can more accurate disclosures in the marketing of restaurants). Indeed, the United States
readily access, namely the list price of regulated products under appropriate Supreme Court has long recognized a
the product, which acts as a point of circumstances, it does not infringe on strong societal interest in the free flow
comparison when judging the protected First Amendment interests. As of information about prescription drug
reasonableness of prices offered for the United States Supreme Court prices:
potential substitute products. In an age recognized in Zauderer v. Office of
Those whom the suppression of
where price information is ubiquitous, Disciplinary Counsel, 471 U.S. 626 prescription drug price information hits the
the prices of pharmaceuticals remain (1985) and recently confirmed in Nat’l hardest are the poor, the sick, and
shrouded and limited to those who Inst. of Family and Life Advocates v. particularly the aged. A disproportionate
subscribe to expensive drug price Becerra, 138 S. Ct. 2361, 2372, 2376 amount of their income tends to be spent on
reporting services. (2018) (‘‘NIFLA’’), required disclosures prescription drugs; yet they are the least able
Consumers may be able to obtain of factual, noncontroversial information to learn, by shopping from pharmacist to
some pricing information by going on- in commercial speech may be subject to pharmacist, where their scarce dollars are
line to the websites of larger chain more deferential First Amendment best spent. When drug prices vary as
pharmacies. However, there are several scrutiny. Under the approach strikingly as they do, information as to who
reasons consumers are not likely to do is charging what becomes more than a
articulated in Zauderer, courts have
convenience. It could mean the alleviation of
this. First, while consumers make many upheld required disclosures of factual physical pain or the enjoyment of basic
critical decisions that bring about the information in the realm of commercial necessities.
ultimate writing of the prescription— speech where the disclosure
making the appointment, asking the requirement reasonably relates to a Va. State Bd. of Pharmacy v. Va.
doctor about particular drugs, etc.—the government interest and is not Citizens Consumer Council, 425 U.S.
physician, rather than the patient, unjustified or unduly burdensome such 748, 763–64 (1976).
ultimately controls the writing of the that it would chill protected speech. See Furthermore, these price disclosures
prescription, and the patient may not Zauderer, 471 U.S. at 651; Milavetz v. would neither ‘‘drown[ ] out the
even know exactly which drug is United States, 559 U.S. 229, 250, 252– [speaker’s] own message’’ or ‘‘effectively
prescribed. Second, meaningful price 53 (2010); NIFLA, 138 S. Ct. at 2376 rule[ ] out’’ a mode of communication.
shopping is further hindered because (‘‘[W]e do not question the legality of NIFLA, 138 S. Ct. at 2378. Indeed, the
the average consumer has no anchor . . . purely factual and uncontroversial requirement to add certain information
price, such as an MSRP for automobiles, disclosures about commercial to an advertisement is not unduly
to gauge the reasonableness of the products.’’). In addition, the United burdensome where, as here, the
various price quotes. States Supreme Court has long manufacturer has the ability to convey
Arming a beneficiary with basic price recognized that broadcast viewers and other information of its choosing in the
information will provide him or her listeners have a significant First remainder of the advertisement. See,
with an anchor price, in other words, a Amendment interest in receiving e.g., Spirit Airlines, Inc. v. United States
reference comparison to be used when information about matters of public Dep’t of Transp., 687 F.3d 403, 414
making decisions about therapeutic concern. See Red Lion Broad. Co. v. (D.C. Cir. 2012) (requirement for airlines
options. Triggering conversations about FCC, 395 U.S. 367, 390, 394 (1969). to make total price the most prominent
a particular drug or biological and its In this proposed rule, the required cost figure does not significantly
substitutes may lead to conversations disclosure consists of purely factual and burdens airlines’ ability to advertise);
not only about price, but also efficacy uncontroversial information about a Discount Tobacco City & Lottery, Inc. v.
and side effects, which in turn may firm’s own product, namely the list United States, 674 F.3d 509, 524 (6th
cause both the consumer and the price of the drug or biological product. Cir. 2012) (size of required warnings is
prescriber to consider the cost of various The required disclosure here advances not unduly burdensome where
alternatives (after taking into account the government’s substantial interest in remaining portions of their packaging
the safety, efficacy, and advisability of the efficient administration of both are available for other information).
each treatment for the particular Medicare and Medicaid programs by Indeed, there are many regulatory
patient). Ultimately, providing minimizing unreasonable expenditures. schemes that require the disclosure of
consumers with basic price information Increased price transparency will help price information to consumers. See 12
may result in the selection of lesser cost reduce unreasonable expenditures CFR 1026.33(b)(2) (2018) (mortgage
alternatives, all else being equal relative associated with soaring drug costs by lenders must disclose to consumers total
to the patient’s care. We seek comment providing manufacturers with an annual loan cost rates for reverse
on how providing consumers with the incentive to reduce their list prices by mortgages); 12 CFR 226.18 (2018)
list price of a medication may influence exposing overly costly drugs compared (creditors must disclose to borrowers
khammond on DSK30JT082PROD with PROPOSAL
interactions with prescribers, the to alternatives to public scrutiny, and multiple terms including the annual
selection of drug products, and the providing consumers with price percentage rate); 12 CFR 1030.4(a) and
perceived efficacy of the prescribed information to facilitate more informed (b) (2018) (depository institutions must
drug. We also seek comment about how health care decisions. See generally provide to a consumer, before an
benefit design influences these choices. Pharm. Care Mgmt. Ass’n v. Rowe, 429 account is opened or service provided,
Requiring DTC television ads to F.3d 294, 310 (1st Cir. 2005) account information including fixed or
disclose pricing information to (recognizing that the government variable interest rates); Mass. Ann. Laws
consumers, as proposed in this rule, is interest in cost-effective health care ch. 94 Section 295C (2018) (retail
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![52794 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules
dealers of motor fuel must publicly or others, only the Wholesale will be the threat of private actions
display and maintain on each pump a Acquisition Cost is certain to be known under the Lanham Act Section 43(a), 15
sign on which the price per gallon per by the manufacturer when creating DTC U.S.C. 1125(a), for unfair competition in
grade is clearly visible); Minn. Stat. ads. the form of false or misleading
Section 239.751 (2017) (retail dealers of The price stated in the advertisement advertising. See, e.g., POM Wonderful
petroleum must clearly display the price must be current as of the date of LLC v. Coca-Cola Co., 134 S. Ct. 2228,
of per gallon and the price cannot be publication or broadcast. This provision 2234 (2014); In re McCormick & Co.,
obscured in any way).15 would specify that where the price is Inc., Pepper Prod. Mktg. & Sales
related to the ‘‘typical course of Practices Litig., 215 F. Supp. 3d 51, 59
II. Provisions of Proposed Regulation treatment,’’ and the course of treatment (D.D.C. 2016). Since Lanham Act cases
(§§ 403.1200, 403.1201, 403.1202, varies depending on the indication for normally involve sophisticated parties
403.1203, and 403.1204) which the drug is prescribed, the list doing business in the same sector, the
As discussed at length above, we are price used should be the one for the likelihood of meritless lawsuits is
proposing this regulation to improve the ‘‘course of treatment’’ associated with acceptably low. We seek comment on
efficient administration of the Medicare the primary indication addressed in the the primary enforcement mechanism
and Medicaid programs by ensuring that advertisement. To the extent and other approaches to enforcing
beneficiaries are provided with relevant permissible under current laws, compliance.
information about the costs of manufacturers would be permitted to Under principles of implied
prescription drugs and biological include an up-to-date competitor preemption, to the extent State law
products so they can make informed product’s list price, so long as they do makes compliance with both Federal
decisions that minimize not only their so in a truthful, non-misleading way. In law and State law impossible or would
out-of-pocket costs, but also § 403.1200(b) we are proposing an frustrate Federal purposes and
unreasonable Medicare and Medicaid exception to the requirement at objectives, the State requirement would
expenditures, both of which are proposed § 403.1202(a) to provide that be preempted. See, e.g., Murphy v.
significant problems. an advertisement for any prescription NCAA, 138 S. Ct. 1461, 1480–81 (2018);
Keeping these principles in mind, we drug or biological product and that has Mutual Pharm. Co. v. Bartlett, 570 U.S.
are proposing to amend subchapter A, a list price, as defined herein, of less 472, 480 (2013); Geier v. American
part 403 by adding a new subpart L. than $35 per month for a 30-day supply Honda Motor Co., 529 U.S. 861, 872–86
Proposed § 403.1202 sets forth the or typical course of treatment will be (2000). Obstacle preemption is not
requirement that advertisements for exempt from these transparency limited to examining the
certain prescription drug or biological requirements. accomplishment of certain objectives;
products on television (including We are also proposing that § 403.1200 the execution is relevant as well. Geier,
broadcast, cable, streaming, and set forth the scope of applicability to 529 U.S. 881–82. A state law is therefore
satellite), must contain a statement or specify that this requirement will apply preempted ‘‘if it interferes with the
statements indicating the Wholesale to any advertisement for a prescription methods by which the federal statute
Acquisition Cost (referred to as the ‘‘list drug or biological product distributed in was designed to reach that goal.’’ Gade
price’’) for a typical 30-day regimen or the United States, for which payment is v. Nat’l Solid Wastes Mgmt. Ass’n, 505
for a typical course of treatment, available, directly or indirectly, under U.S. 88, 103 (1992) (quoting Int’l Paper
whichever is most appropriate, as titles XVIII or XIX of the Social Security Co. v. Ouellette, 479 U.S. 481, 494
determined on the first day of the Act. (1987)).
quarter during which the advertisement We are further proposing in Because this proposed rule is part of
is being aired or otherwise broadcast, as § 403.1203 that the required price a broader initiative to reduce the price
follows: ‘‘The list price for a [30-day disclosure set forth in proposed to consumers of prescription drugs and
supply of ] [typical course of treatment § 403.1202 be conveyed in a legible biological products, it would be
with] [name of prescription drug or textual statement at the end of the counterproductive if this rule were to
biological product] is [insert list price]. advertisement, meaning that it is placed increase transactional costs in defending
If you have health insurance that covers appropriately and is presented against a meritless litigation. We believe that the
drugs, your cost may be different.’’ contrasting background for sufficient existing authority cited above, namely
Manufacturers set the Wholesale duration and in a size and style of font the Lanham Act, is the appropriate
Acquisition Cost, also known as list that allows the information to be read mechanism for enforcing against
price, for their products. The easily. We seek comment on whether deceptive trade practices. Accordingly,
Department recognizes that other prices the final rule should include more consistent with our not including any
may be paid by distributors, specific requirements with respect to HHS-specific enforcement mechanism
pharmacies, patients, and others in the the textual statement, such as specific in this proposal, we are proposing at
supply chain. Because these other prices text size, contrast requirements, and/or § 403.1204(b) that this rule preempt any
vary by contracts established by payors duration and specifically what those state-law-based claim which depends in
requirements should be. whole or in part on any pricing
15 In addition, regulated entities are required to
We are proposing in § 403.1204(a) that statement required by this rule.
report price information to the government in a the Secretary shall maintain a public list In publishing this proposed rule, we
variety of settings. See, e.g., 7 CFR 59.301(a) and (b)
(2018) (packer processing plants must daily report that will include the drugs and are seeking comment on the specifics of
to the Secretary of Agriculture the sale price for biological products identified by the the proposal. In particular, we seek
khammond on DSK30JT082PROD with PROPOSAL
lambs which the Secretary of Agriculture then Secretary to be advertised in violation of comment on whether Wholesale
makes public); 7 CFR 59.104(a)(1) (2018) (packer this rule. We expect that this Acquisition Cost is the amount that best
processing plants must report to the Secretary of
Agriculture twice a day the sale price of each lot information will be posted publicly on reflects the ‘‘list price’’ for the stated
of ‘‘boxed beef’’ which the Secretary of Agriculture a CMS internet website no less than purposes of price transparency and
then makes public); 17 CFR 229.1204(b)(1) (2018) annually. No other HHS-specific comparison shopping under this
(oil and gas producers must report to the SEC the
average sale price per unit of oil, gas, or other
enforcement mechanism is proposed in proposed regulation. We also seek
product by geographic area for three preceding this rule. However, we anticipate that comment on whether 30-day supply and
fiscal years). the primary enforcement mechanism typical course of treatment are
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![52796 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules
TABLE F1—NATIONAL OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES
Mean hourly Adjusted
Occupation
BLS occupation title wage hourly wage
code ($/hr) ($/hr)
Office and Administrative Support Occupations .......................................................................... 43–0000 $18.24 $36.48
Marketing Managers .................................................................................................................... 11–2021 63.57 127.14
As indicated, we are adjusting our advertisement per quarter or 300 hours V. Regulatory Impact Analysis
employee hourly wage estimates by a per year across all pharmaceutical
A. Statement of Need
factor of 100 percent. This is necessarily companies running affected televised
a rough adjustment, both because fringe advertisements ((300 ads/quarter) × (4 This proposed rule aims to improve
benefits and overhead costs vary quarters/year) × (.25 hours/ad). As a the quality, accessibility and
significantly from employer to result, using wage information provided affordability of the Medicare Part C and
employer, and because methods of in Table 1, we estimate costs of $19,812 Part D programs and to improve the
estimating these costs vary widely from (300 ads × $66.04/ad) per quarter or CMS customer experience by providing
study to study. Nonetheless, there is no $79,248 in each year following transparency into drug prices with the
practical alternative and we believe that goal of reducing the price to
publication of the final rule after
doubling the hourly wage to estimate beneficiaries of certain prescription
adjusting for overhead and benefits.
total cost is a reasonably accurate drugs and biological products.
estimation method. C. Submission of PRA-Related Currently, consumers have incomplete
Comments information regarding the cost of
B. ICRs Regarding Pricing Information pharmaceutical products. As a result,
(§ 403.1202) We have submitted a copy of this they lack important information needed
Proposed § 403.1202 would require proposed rule to OMB for its review of to inform their decisions, which likely
that advertisements for certain the rule’s information collection and leads to inefficient utilization of
prescription drug or biological products recordkeeping requirements. These prescription drugs. This proposal will
on television (including broadcast, requirements are not effective until they require disclosure of prescription drug
cable, streaming, and satellite), contain have been approved by the OMB. prices to the general public for products
a statement or statements indicating the advertised on television. This may
To obtain copies of the supporting
Wholesale Acquisition Cost (referred to improve awareness and allow the
statement and any related forms for the
as the ‘‘list price’’) for a typical 30-day general public to respond, potentially
regimen or for a typical course of proposed collections discussed above,
increasing the efficiency of prescription
treatment, whichever is most please visit CMS’ website at website
drug utilization.
appropriate, as determined on the first address at https://www.cms.gov/
day of the quarter during which the Regulations-and-Guidance/Legislation/ B. Overall Impact
advertisement is being aired or PaperworkReductionActof1995/PRA- We acknowledge that examination of
otherwise broadcast. The presentation of Listing.html or call the Reports the impact of this proposed rule is
this information must appear in a Clearance Office at 410–786–1326. required by Executive Order 12866 on
specific format. As stated earlier in We invite public comments on these Regulatory Planning and Review
Section II of this notice of proposed potential information collection (September 30, 1993), Executive Order
rulemaking, the notification must be requirements. If you wish to comment, 13563 on Improving Regulation and
presented as follows, ‘‘The list price for please submit your comments Regulatory Review (January 18, 2011),
a [30-day supply of ] [typical course of electronically as specified in the the (RFA) (September 19, 1980, Pub. L.
treatment with] [name of prescription ADDRESSES section of this proposed rule 96–354), Section 1102(b) of the Social
drug or biological product] is [insert list and identify the rule (CMS–4187–P) and Security Act, Section 202 of the
price]. If you have health insurance that where applicable the ICR’s CFR citation, Unfunded Mandates Reform Act of 1995
covers drugs, your cost may be (UMRA) (March 22, 1995; Pub. L., Pub.
CMS ID number, and OMB control
different.’’ L. 104–4), Executive Order 13132 on
We estimate that 25 pharmaceutical number.
Federalism (August 4, 1999), the
companies will run an estimated 300 See the DATES and ADDRESSES sections Congressional Review Act (5 U.S.C.
distinct pharmaceutical ads that appear of this proposed rule for further 804(2)), and Executive Order 13771 on
on television each quarter and will be information. Reducing Regulation and Controlling
affected by this rule. For these ads, we Regulatory Costs (January 30, 2017).
estimate that administrative support IV. Response to Comments
The Regulatory Flexibility Analysis
staff and marketing managers will need Because of the large number of public (RFA), as amended, requires agencies to
to verify the prescribed language and comments we normally receive on analyze options for regulatory relief of
that the correct price appears in each Federal Register documents, we are not small businesses, if a rule has a
advertisement each quarter. We estimate able to acknowledge or respond to them significant impact on a substantial
khammond on DSK30JT082PROD with PROPOSAL
that this will require 10 minutes and individually. We will consider all number of small entities. For purposes
$24.08 ($34.48/hr × .66) per of the RFA, small entities include small
comments we receive by the date and
advertisement for administrative businesses, nonprofit organizations, and
time specified in the DATES section of
support staff. We also estimate 5 small governmental jurisdictions.
minutes and $41.96 ($127.14/hr × .33) this preamble, and, when we proceed In addition, section 1102(b) of the Act
per advertisement for marketing with a subsequent document, we will requires us to prepare a regulatory
managers, for a total of 15 minutes (0.25 respond to the comments in the analysis for any rule or regulation
hours) and $66.04 ($24.08 + $41.96) per preamble to that document. proposed under Title XVIII, Title XIX,
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![Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Proposed Rules 52799
TABLE 2—ACCOUNTING TABLE OF BENEFITS AND COSTS OF ALL PROPOSED CHANGES
Present value over 2020–2024 Annualized value over 2020–
by discount rate 2024 by discount rate
Benefits: (millions of 2016 dollars) (millions of 2016 dollars)
3 Percent 7 Percent 3 Percent 7 Percent
Quantified Benefits .......................................................................................... 0 0 0 0
Non-quantified Benefits: Improved transparency for prescription drug and biological product prices.
Costs: 3 Percent 7 Percent 3 Percent 7 Percent
Quantified Costs .............................................................................................. 12.1 9.4 2.6 2.3
Non-quantified Costs:
See narrative discussion.
List of Subjects in 42 CFR Part 403 typical course of treatment shall be list price for a [30-day supply of]
Grant programs—health, Health exempt from the requirements of this [typical course of treatment with] [name
insurance, Hospitals, Intergovernmental subpart. of prescription drug or biological
relations, Medicare, Reporting and product] is [insert list price]. If you have
§ 403.1201 Definitions.
recordkeeping requirements. health insurance that covers drugs, your
(a) Biological product. Biological cost may be different.’’ Where the price
For the reasons set forth in the product means any biological product, is related to the ‘‘typical course of
preamble, the Centers for Medicare & as that term is defined in Public Health treatment’’ and that course of treatment
Medicaid Services proposes to amend Service Act (‘‘PHS Act’’) section 351(i), varies depending on the indication for
42 CFR chapter IV as set forth below: that is licensed by the Food and Drug which a drug is prescribed, the list price
Administration pursuant to section 351 to be used is the one for the ‘‘course of
PART 403—SPECIAL PROGRAMS AND and is subject to the requirements of
PROJECTS treatment’’ associated with the primary
Federal Food, Drug, and Cosmetic Act indication addressed in the
(FDCA) section 503(b)(1). advertisement.
■ 1. The authority citation for part 403 (b) Prescription drug. Prescription
is revised to read as follows: drug means any drug, as defined in the § 403.1203 Specific presentation
Authority: 42 U.S.C. 1302, and 1395hh. FDCA section 201(g), that has been requirements.
■ 2. Add subpart L to read as follows: approved by the Food and Drug The textual statement described in
Administration pursuant to FDCA § 403.1202 shall be presented at the end
Subpart L—Requirements for Direct to section 505 and is subject to the
Consumer Television Advertisements of of an advertisement in a legible manner,
requirements of FDCA section 503(b)(1). meaning that it is placed appropriately
Drugs and Biological Products To Include
(c) List price. List price means the
the List Price of That Advertised Product and is presented against a contrasting
wholesale acquisition cost, as defined in
Sec. background for sufficient duration and
paragraph (d) of this section.
403.1200 Scope. (d) Wholesale acquisition cost. in a size and style of font that allows the
403.1201 Definitions.
Wholesale acquisition cost means, with information to be read easily.
403.1202 Pricing information.
403.1203 Specific presentation respect to a drug or biological, the § 403.1204 Compliance.
requirements. manufacturer’s list price for the drug or
biological to wholesalers or direct (a) Identification of non-compliant
403.1204 Compliance.
purchasers in the United States, not products. The Secretary shall maintain
Subpart L—Requirements for Direct to including prompt pay or other a public list that will include the drugs
Consumer Television Advertisements discounts, rebates or reductions in and biological products identified by
of Drugs and Biological Products To price, for the most recent month for the Secretary to be advertised in
Include the List Price of That which the information is available, as violation of this subpart.
Advertised Product reported in wholesale price guides or (b) State or local requirements. No
other publications of drug or biological State or political subdivision of any
§ 403.1200 Scope. State may establish or continue in effect
pricing data.
(a) Covered pharmaceuticals. Except any requirement that depends in whole
as specified in paragraph (b) of this § 403.1202 Pricing information. or in part on any pricing statement
section, this subpart applies to Any advertisement for any required by this subpart.
advertisements for a prescription drug prescription drug or biological product
Dated: October 11, 2018.
or biological product distributed in the on television (including broadcast,
cable, streaming, or satellite) must Seema Verma,
United States for which payment is
khammond on DSK30JT082PROD with PROPOSAL
available, directly or indirectly, under contain a textual statement indicating Administrator, Centers for Medicare &
the current list price for a typical 30-day Medicaid Services.
titles XVIII or XIX of the Social Security
Act. regimen or for a typical course of Dated: October 11, 2018.
(b) Excepted pharmaceuticals. An treatment, whichever is most Alex M. Azar II,
advertisement for any prescription drug appropriate, as determined on the first Secretary, Department of Health and Human
or biological product that has a list day of quarter during which the Services.
price, as defined in § 403.1201, less than advertisement is being aired or [FR Doc. 2018–22698 Filed 10–15–18; 4:15 pm]
$35 per month for a 30-day supply or otherwise broadcast, as follows: ‘‘The BILLING CODE 4120–01–P
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Document Created: 2018-10-18 03:06:04
Document Modified: 2018-10-18 03:06:04
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Proposed rule. | |
| Dates | To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 17, 2018. | |
| Contact | Cheri Rice, (410) 786-6499. | |
| FR Citation | 83 FR 52789 | |
| RIN Number | 0938-AT87 | |
| CFR Associated | Grant Programs-Health; Health Insurance; Hospitals; Intergovernmental Relations; Medicare and Reporting and Recordkeeping Requirements |
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