Monday, October 15, 2018

Very Brief Blog: CMS Issues One of the Most Unusual CMS Regulations Ever (Drug Pricing on TV)

UPDATE: Finalized May 2019 - here.

On October 15, 2018, CMS released proposed regulations that would require TV advertisements to include drug pricing information, if they are drugs that are covered under Medicare "directly or indirectly."
  • See a trade journal article here.  Follow-up trade journal here and here.
  • See the actual 42 page proposed regulation here
    • Seema Verma press release here.
    • Seema Verma same week at AHIP, here.
Since this new regulation is directed at consumer ads, it is a bit surprising to see it as falling under CMS's legal authority rather than e.g. some other part of HHS or maybe the FTC.   The regulations on price advertisement will be tucked among other routine CMS regulations at 42 CFR 403.1200ff.

CMS Works to Justify Why It Can Do This

Anticipating reactions between skepticism and surprise, CMS dives directly into a long and elaborate discussion of whether it has authority to regulate content of TV ads because it pays for drugs. 

Many pages of the regulation read like an overcaffeinated litigator's legal brief, citing a dizzying cascade of court cases and precedents.  For example, we learn that Massachusetts Law 94 295C requires retail dealers of motor fuel to public display on each pump the price per gallon.  Well, yes.  And that 7 CFR 59.301(a) and (b) require that meat packer processing plants must daily report to the Secretary of Agriculture the sale price for lambs.  (Quiz later.)   The authors reach back to a 42-year old economics article on drug pricing (by John F. Cady, then an assistant professor at Harvard MBA school and today still in service at Indiana University).

The authors then start running down a list of federal court citations like Colorado Indian River Tribe v Indian Gaming Commission 466 F 3d 134, 139, and Thorpe v Housing Authority of Durham, 393 US 268, 277 (see esp. n. 28).   At this, point, Lexis was threatening to overheat.

Pivoting the reader toward the argument on the table, that CMS can regulate the TV display of drug prices, CMS notes that Section 1102(a) of the SSA allows CMS to make "such rules and may be necessary to the efficient administration of functions" under the SSA.   Section 1871(a) allows CMS to "prescribe such regulations as may be necessary to carry out the programs."

CMS "has concluded that the proposed rule has a clear nexus to the Social Security Act."   They note that CMS spent $174B in 2016 on Part B & D drugs, and $64B on Medicaid drugs.  This $238B was 53% of $448B spent on "retail and non retail" prescription drugs.

Most of the CMS regulation is about consumer behavior and consumer advertising, something never directly addressed in the enabling legislation for Medicare and Medicaid.


There is a 60-day comment period (about December 15, 2018). The regulation is CMS-4187-P.


See a trade journal article in MedCityNews - noting that only New Zealand and US allow DTC drug advertising; here.  PHRMA had been discussing voluntary price disclosure guidelines.  For some additional ins and outs of drug price transparency, MedCityNews also here.   Fierce Healthcare notes that most DTC ads have pivoted away form the Lipitor's and Viagra's of the past and towards obscure specialty psoriasis drugs or cancer drugs, here.

Figure: Source here.

For a concurrent article about a Brookings Institute event on drug pricing, including Part B drug pricing, including speeches from Seema Verma and others, here.


Note that this isn't primarily about the drug prices - you can already get many drug prices for free by digging around the CMS website - it's about lifting those prices into TV ads.

CMS also requests comment on whether it should just make drug prices more transparent on its government websites (e.g. imagine  Yes, it could do a lot there, and very fast.

CMS argues that consumers will want to compare prices.  However, if drug prices are so hard to get, seeing the price of just ONE single drug in ONE ad is a terrible way to comparison shop for drugs for your disease.  Would you have to sit in front of a TV all day, all week waiting for the very very rare Crohn's disease commercials (at two a.m.?) and jotting down prices?

Would there be a boomerang effect?  Who dying of heart disease or cancer wants the cheapest drug?  Might they not assume that logically, the more expensive drugs will be the higher quality and more effective drugs they need?