ANA Joins Opposition to HHS Prescription Drug Price Disclosure Rule

The Centers for Medicare and Medicaid (CMS) has a new rule requiring disclosures in direct-to-consumer television ads for prescription drugs payable under Medicare/Medicaid. It seeks to reduce prescription-drug costs, and thus federal expenditures, by requiring each such ad to state textually on-screen the drug’s list price, defined as “Wholesale Acquisition Cost.” “Television” is defined to include broad­casting, cable, streaming video, and satellite. The rule prescribes the dis­closure’s language, including a qualifier that “If you have health insurance that covers drugs, your cost may be different.” We believe that this rule is a serious threat to the First Amendment protections of advertising and would create precedents that would be extended to many products far beyond the area of prescription drugs.

The rule will neither work the way that CMS postulates, nor accomplish its objectives. The disclosure will seriously mislead consumers, because most do not pay “list price” for prescriptions due to insurance or other arrangements. It is also likely to have adverse health consequences due to forgone treatments that the disclosure misleadingly suggests are too expensive. And, given how the market for prescription drugs operates, the disclosure is unlikely to reduce prices, the substantial interest the government purports would be furthered by this rule. It may also drive pharmaceutical companies to reduce advertising and/or shift it to media not subject to the rule, reducing the information consumers receive.

The rule violates the First Amendment. First, it fails to meet the test for commercial dis­closures set forth by the U.S. Supreme Court in Zauderer v. Office of Disciplinary Counsel. Given the virtual irrelevance of prescription-drug “list price” to most consumers, the disclosure is not accurate, purely factual, and noncontroversial as Zauderer requires. CMS also rejected the burden the disclosure imposes in distracting from ads in which it must appear for a prescribed duration and in a prescribed size. The rule sets very dangerous precedents.

It also fails the constitutional test for commercial speech under Central Hudson v. Public Service Commission. Serving policy goals by burdening ads should never be an acceptable government interest for speech regulation. CMS’s view that it is empowered to “expose” drugs as “overly costly,” and to attempt to shame or bully manufacturers into lower prices by requiring disclosures is particularly troubling. There is no evidence the rule will reduce prescription drug costs, other than CMS virtually unsupported speculation. There are less restrictive options to conscripting advertisers’ speech — including CMS making its own disclosures of drug prices or taking out its own ads.

ANA filed comments (as part of The Advertising Coalition) opposing the CMS rule. It was important to take a stand because regulators at all levels are adopting regulations that use advertisers to convey governmental messages or to serve political or social ends. The District of Columbia recently attempted to prescribe labels for disposable wipes that do not meet its definition of “flushable,” which varied from standards used in industry. San Francisco targeted disfavored sugar-sweetened beverages with labeling about how they contribute to obesity, diabetes and tooth decay (with Baltimore considering following suit). And Berkeley requires disclosures for cell phones suggesting they are dangerous to use, despite contrary FCC safety disclosures. It is vital that such cases not be allowed to whittle down First Amendment protections advertising has come to enjoy. Therefore, ANA today has joined with Merck, Eli Lilly, and Amgen to bring a lawsuit to enjoin this misguided rule that would otherwise blow significant holes in advertisers First Amendment protections.