CMS Proposes Pricing Info Included on DTC Ads: What You Need to Know

October 18, 2018

Executive Summary

The Centers for Medicare & Medicaid Services is taking steps to require pricing to be included in DTC advertising. In response, PhRMA has issued new transparency guidelines that we are advising our clients to consider. While experts are dubious about whether the CMS proposed ruling would ever be approved, given the extensive and problematic process that would need to be followed as well as legal barriers, many – including we at CMI/Compas – see this as a sign that more transparency will be required in the near future, and our industry is proactively taking action to prepare. This POV includes recommendations on the steps our clients should be taking now and in the near future.

Background – CMS Action

A press release issued on October 15, 2018 by The Centers for Medicare & Medicaid Services (CMS) begins: “As part of the agency’s ongoing efforts to empower patients and lower prescription drug prices, the Centers for Medicare & Medicaid Services proposed today to require that prescription drug manufacturers post the Wholesale Acquisition Cost (WAC) for drugs covered in Medicare or Medicaid in direct-to-consumer television advertisements.”

At this vantage point, it does not seem likely that this will become law. From The Washington Post: “The draft rule will now be debated through the fall, and its likelihood of becoming an actual requirement will hinge, in large part, on the intensity of the industry’s resistance.” Many experts have said this would violate freedom of speech and do not feel it would be approved. There are also issues regarding how this law would actually be enforced.

Background – PhRMA Response

This move does not come as a surprise, and in fact on the same day the PhRMA Board of Directors kicked off action that is separate from CMS but related to pricing transparency. They issued a press release that active members have agreed to proactively adopt measures to enhance the PhRMA Guiding Principles on Direct to Consumer Advertisements about Prescription Medicines by releasing pricing information voluntarily. The revised, voluntary Principles would become effective on April 15, 2019. The proposed self-guidance is only for TV advertising at this point, suggesting a link to a website where such information can be found rather than requiring it to be aired at the time of the ad as this proposed ruling suggests.

The PhRMA action will move forward regardless of whether the CMS action becomes law.

The Implications and  What Pharma Marketers Should do to Prepare

At CMI/Compas and across WPP we are monitoring closely and continually sharing guidance with our clients.

While it does not seem likely that this ruling would go into effect, PhRMA has committed to more transparency with their new measures, and so it makes sense for all pharma companies to be preparing for a shift in pricing transparency. Our recommendation is that companies not part of PhRMA should discuss implications with their government and regulatory affairs teams and make decisions jointly based on what they believe is most appropriate.

If such a ruling would go into effect, the government would likely give companies ample time (6-12 months) to prepare. One major implication of this ruling, if passed, is the potential of increasing the cost of air time, as longer TV ads may be needed to ensure enough time to read list price information and surrounding contextual cost messaging.

In addition to getting on board with the changes PhRMA is proposing, we are advising that our clients begin discussions now to prepare for such broadcast media implications as well as those that are likely to impact their search and social strategies.

While there’s no way at this point in time to know the specific implications, there’s much we can do to prepare. Aligning search and social strategies is a good first move. Social listening can allow a gauge of consumer reaction and enable smart response. We want to be there when the conversations are happening and be a resource to them. We can also review search queries to see how queries around cost change or increase, and then modify the brand’s bidding strategy. In addition, we partner with a number of interesting companies that enable reaching consumers based on TV schedule and other relevant factors that would be beneficial in further supporting and educating patients around pricing, direct out of pocket costs and other financial support that is provided.