United States: CMS Final Rule Requires Prescription Drug Pricing Transparency In DTC Advertising

Last Updated: May 28 2019
Article by Brian P. Carey, Paul T. Kim, August T. Horvath and Snehal Trivedi


On May 8, 2019, the Centers for Medicare & Medicaid Services ("CMS") finalized the regulation ("Final Rule" or "DTC Rule") requiring direct-to-consumer ("DTC") prescription drug television advertisements to include the wholesale acquisition cost ("WAC") or list price of a drug or biological product directly or indirectly paid by the Medicare or Medicaid programs. This is one of the first final rules to be issued following President Trump's Drug Pricing Blueprint issued in May 2018. Secretary Azar commented on the DTC Rule that "[m]aking those prices more transparent is a significant step in President Trump's efforts to reform our prescription drug markets and put patients in charge of their own healthcare."

We previously published an alert on the proposed rule discussing the impact of the DTC Rule on Medicaid and Medicare Programs and the implications of enforcement under the Lanham Act. The Final Rule largely adopts the provisions of the proposed rule, requiring manufacturers to disclose in DTC television advertisements the WAC of drugs and biologics with a list price over $35 for a 30-day supply or a typical course of treatment. Notably, CMS acknowledges that "Congress has not explicitly provided HHS with authority to compel the disclosure of list prices to the public." Instead, the agency relies upon the private right of action under the Lanham Act and upon the basis of unfair competition in the form of false or misleading advertising as the primary enforcement mechanism.

Although the DTC Rule finalizes these requirements, it slightly modifies the proposed 42 C.F.R. § 403.1204(b) related to state preemption and notes technical changes to 42 C.F.R. § 403.1202 to improve clarity surrounding commentary on whether changes to or expiration of list prices should be disclosed.

The rule is effective in July 2019 following 60 days after the date of publication in the Federal Register. However, finalizing the Final Rule likely will give rise to litigation challenges on First Amendment free speech grounds.

Below is a summary of key features adopted by the Final Rule, the modifications from the proposed rule and notable commentary.

Requirements for Drug Pricing Transparency in DTC Advertisements – 42 C.F.R. §§ 403.1200-403.1203

The Final Rule applies to any advertisements for prescription drugs or biological product distributed in the U.S. for which payment is available, directly or indirectly, under Medicaid and Medicare. Drugs and biologicals under $35 per month for a 30-day supply or typical course of treatment will be exempt from the transparency requirements.

Specifically, advertisements on television (including broadcast, cable, streaming, and satellite) for certain prescription drug or biological products must contain a statement indicating the current WAC (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 list price disclosure must be conveyed in legible textual statement at the end of the advertisement, placed "appropriately" and "presented against contrasting background for sufficient duration in a size and style of font that allows the information to be easily read."

The regulation also sets forth the model DTC language 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."

Enforcement and Compliance – 42 C.F.R. § 403.1204

Lanham Act as the Primary Enforcement Mechanism

As noted above, CMS lacks enforcement authority. The Final Rule states that CMS will publicize manufacturers that create false or misleading ads, but primary enforcement will be left to the industry itself. CMS relies on Section 43(a) of the Lanham Act ("Act") to be the primary vehicle for enforcement for failure to comply with the DTC Rule. No other HHS-specific enforcement mechanism was proposed. In the preamble, CMS supports its position on the Lanham Act as an appropriate mechanism for enforcing trade deceptive practices by highlighting the fundamental statutory premise of protecting consumers from false and misleading advertising. Since Section 43(a) requires a "false or misleading description of fact, or false or misleading representation of fact," omission of pricing information makes an advertisement false and thus, actionable.

The Agency dismisses concerns about litigation costs by asserting the commercial-friendly nature of the statute. Since sophisticated parties would be involved, CMS argues, the likelihood of meritless lawsuits is low and the Lanham Act as an enforcement mechanism is appropriate to deter drug manufacturers from raising prices to account for the costs in defending against meritless litigation.

The Final Rule adopts the proposed compliance regulation at § 403.1204(a) providing that the Secretary will maintain and annually update a public list of drugs and biologicals that violate this rule.

Notable Commentary from the Final Rule

CMS addressed many stakeholder comments related to the use of WAC and to First Amendment concerns.

Disclosure of WAC as Potentially Misleading

CMS disagreed with comments generally opposing the use of WAC based on the concern that it was not a meaningful measure of what a patient would pay for a drug and is therefore, misleading and confusing. In response, the Agency elaborated that consumers would be better able to approximate their out-of-pocket (OOP) costs for expensive drugs if they were provided information on the WAC. Finding support in a 2019 Journal of the American Medical Society (JAMA) study, CMS found that subjects realistically determined their OOP costs based on WAC disclosure. Subjects who were informed that the WAC for a drug was $15,000 expected their OOP costs to be substantially larger ($2,787) than those who were not provided such disclosure ($78).

Discussion Related to the Use of WAC as List Price

The Final Rule also addressed concerns related to whether WAC is an appropriate reflection of the list price for purposes of price transparency. As some commenters noted, the WAC is non-standardized and varies by National Drug Code (NDC). CMS disagreed with the notion that WAC is non-standardized as it has been used in Medicare Part B drug payment policies "for more than a decade without significant concern that it is not a meaningful price point." Additionally, the negotiated prices in Medicare Part D are largely a function of pharmacy-level charges which are expressed in network pharmacy contracts as a function of WAC.

With respect to variations between NDC and WAC, CMS clarifies, "[t]o the extent an NDC reflects an amount of the manufacturer's product other than a 30-day supply or typical course of treatment, the manufacturer will need to use reasonable assumptions to determine the appropriate list price for a 30-day supply or typical course of treatment."

First Amendment Considerations

CMS addressed many of the First Amendment concerns raised by commenters. At the outset, the Agency noted, "the speech here at issue does not implicate core First Amendment interests." CMS found the Zauderer standard as an appropriate framework in support of First Amendment concerns.

Under that standard, "the government may, consistent with the First Amendment, require disclosure of factual information in marketing commercial products where the disclosure is justified by a government interest and does not unduly burden protected speech." As the Agency highlighted, "the government interest is clear." According to CMS, the dramatic increase in prescription drug spending has impacted the nation's health care spending and drug pricing transparency enables market efficiencies by helping consumers make informed choices. The Agency concludes that the brief disclosure at the end of DTC television advertisements is narrowly tailored to achieve this result.

Additionally, CMS concludes the required disclosure to not be unduly burdensome because the Agency deems the WAC to be a truthful statement of objective fact that is uncontroversial. As CMS further notes, "all drug manufacturers provide this information voluntarily to companies who publish this information in compendia or databases available to the public . . . []."

CMS' Response to the Use of PhRMA's Guiding Principles: Direct to Consumer Advertisements About Prescription Medicines (hereinafter, PhRMA's Guidelines)

Finally, CMS addresses comments asserting that the required disclosure was unnecessary because many prescription drug manufacturers have begun voluntarily providing pricing information on their websites pursuant to PhRMA's Guidelines. The Guidelines as revised in October 2018, included principles to recommend that prescription drug broadcast advertisements include directions to where patients can find information about the cost of medicine.

CMS pointed to inadequacies of PhRMA's Guidelines indicating: (1) that the principles are voluntary and not binding on PhRMA members, (2) there is nothing to prevent PhRMA from revising its principles at any time, and more importantly, (3) including direction to where price information can be found is not as impactful as including information in the advertisement itself.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions