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Ad War Over Drug Prices Goes One Step Forward, Two Questions Back

‘I undoubtedly will be sued,’ HHS chief Azar has predicted

Allies of the pharmaceutical industry, such as Sen. Orrin Hatch, R-Utah, have reservations about a plan to give HHS a green light on new regulations for drug price disclosure. (Bill Clark/CQ Roll Call file photo)
Allies of the pharmaceutical industry, such as Sen. Orrin Hatch, R-Utah, have reservations about a plan to give HHS a green light on new regulations for drug price disclosure. (Bill Clark/CQ Roll Call file photo)

Updated 11:04 a.m. | A spending bill passed by the Senate last week includes $1 million for the Trump administration to craft new regulations forcing companies to include prices in prescription drug ads.

But there’s still the question of how that would work — and whether the Department of Health and Human Services has the legal authority to make drug companies disclose prices in TV, radio and other advertisements to consumers.

Trade groups representing makers of brand name drugs are opposed to the proposal, saying it could cause confusion for consumers, since patients typically pay only a portion of a drug’s list price after negotiations by insurers, rebates and other variables are factored in. Such a move would also raise legal questions, drug companies argue.

Daniel Seaton, a spokesman for BIO, a trade group representing biotechnology firms, said consumers would have greater transparency if insurance companies and other middlemen had to disclose their impacts on prescription drug pricing.

Meanwhile, the middlemen that drugmakers point to as complicating the prices paid say they support providing more information in ads — if the disclosures specifically focus on the original list price.

Matt Eyles, the president of America’s Health Insurance Plans, favors the proposal, writing in a letter last week that it “recognizes that greater transparency is a crucial ingredient of the broad-based strategy” to lower drug prices.

“We urge you to recognize that the entire pricing process is driven entirely by the original list price of a branded drug — which is determined solely by the drug company, not by the market or any other participant in the pharmaceutical supply chain,” he wrote.

That fundamental tension between the trade groups speaks directly to the challenges HHS will face in developing a policy that is actually meaningful for consumers, whose out of pocket costs are generally less than list prices.

Michael Strazzella, a health care lobbyist at the firm Buchanan, Ingersoll and Rooney PC, asked what kind of caveats drugmakers would be allowed to include when communicating prices.

“Are they going to allow the pharma companies to build in some type of disclaimer that ‘this price may vary due to insurance’?” he said.

HHS Secretary Alex Azar told a Senate panel earlier this year that making such a move without additional congressional action would likely lead to litigation.

“I would always appreciate congressional authority to back me up on that because I undoubtedly will be sued,” Azar said, adding, “It’s an important piece of information that consumers are entitled to, along with cost-benefit.”

Still, it appears HHS could be on track to release a regulation even prior to congressional action to clarify its authorities. A proposed rule related to drug pricing transparency is pending review at the Office of Management and Budget as of Tuesday, though the text of the proposal is not yet available.

Uncertainty remains

The funds included in the Senate bill mark Congress’ latest small step to address drug costs after the administration laid out its blueprint to lower pharmaceutical prices earlier this year.

But it’s uncertain whether the proposal will move forward and ultimately become law. The House hasn’t yet voted on its measure to fund HHS for fiscal 2019, which doesn’t include language on advertisements.

One prominent lawmaker who ultimately supported the Senate language still has some concerns as well. A press secretary for Senate Finance Committee Chairman Orrin G. Hatch said he “looks forward to continuing to discuss other potential modifications to avoid unintended consequences.”

It’s unclear what further changes Hatch and other pharmaceutical industry allies may seek. The amendment adopted on Thursday had already undergone significant changes from the first time the issue was raised in the Senate.

In July, when the chamber was considering another spending bill that included funding for the Food and Drug Administration, Iowa Republican Charles E. Grassley and Illinois Democrat Richard J. Durbin offered a similar amendment. (The FDA, even though it is part of HHS, has its discretionary funding provided in the bill that funds the Agriculture Department.)

That proposal would have clarified that the HHS secretary’s authorities to regulate direct-to-consumer advertising of prescription drugs should “include the authority to require” that ads include “an appropriate disclosure of pricing information.”

But the pharmaceutical industry, and by proxy the lawmakers who fight for it, had an easy argument to fall back on for why that amendment wouldn’t pass muster: it was authorizing language on an appropriations bill. Given the fact that this year’s appropriations process in the Senate has been marked by bipartisan cooperation and a lack of policy riders, controversial or not, it was easy to paint this as a tough sell.

When Grassley and Durbin tried again for the broader HHS package, the amendment they filed was about providing funding instead of granting authority. It stated that “in furtherance of the existing statutory authority” of HHS to issue a regulation requiring pricing information in prescription drug ads, Congress would provide $1 million.

But the version of the amendment that was ultimately adopted last week eschewed any reference to authority whatsoever. It simply said that $1 million should be used by HHS to issue the regulation — without weighing in on whether the department actually has the authority to do so, or granting such power. A Democratic Senate aide said that even though not all senators were completely comfortable with the amendment on Thursday, “no Republican senator wanted to publicly oppose it.”

Legal questions

It’s unclear whether providing the funding would be enough to shield HHS from legal challenges. But Strazzella, the health care lobbyist, thinks that if Congress provides them with funding to carry out the regulations, it’s as good as giving them the authority to do it.

“I think this helps empower their case,” he said.

He also noted that prices in advertising could change the calculation for the generic drug industry, where companies don’t typically spend any money marketing their products. But that might change if the prices were going in the ads, he said.

For its part, the Association for Accessible Medicines, the trade group representing generic drugmakers, doesn’t have a position on the issue of prices in advertising.

Correction 11:04 a.m. | This story has been corrected to reflect that the Association of Accessible Medicines has not taken a position on the issue of including prices in prescription drug advertising.

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