The Trump administration took one of its more combative moves on drug pricing Monday, when Health and Human Services Secretary Alex Azar introduced a proposal requiring drugmakers to disclose list prices in television advertisements.
The proposal sets up what is expected to be a confrontation between the drug industry and the federal government. It also raises a slate of legal, political and regulatory questions that will be debated in the coming months. Here are five of the most pressing, and what experts are saying about them:
Can the administration actually do this?
Health and Human Services Secretary Alex Azar certainly thinks so. But it's an open question, according to legal experts, and one that's likely to face tests in court.
"There are significant legal challenges that HHS will have a hard time overcoming, in particular if the case comes up to the new Supreme Court," said Chad Landmon, a partner at Axinn, Veltrop & Harkrider, in an interview with BioPharma Dive.
The rule is being proposed through the Centers for Medicare and Medicaid Services, rather than the Food and Drug Administration, which regulates what drugmakers can say about the safety and efficacy of their products.
HHS argues that it has the authority to require price disclosures in ads through the Social Security Act, which tasks it with the "efficient" administration of the Medicare and Medicaid programs.
The agency says the rule would help to lower prices and therefore is "necessary" for efficiently managing those government health programs.
That's not a shut-and-closed case, though, said Rachel Sachs, an associate professor of law at Washington University in St. Louis.
"It's not obvious that including pricing information in ads is necessary for the effective administration of this program," she said in an interview with BioPharma Dive.
Sachs also noted the drug industry could argue that Congress gave the FDA authority to regulate drugmaker direct-to-consumer marketing, and not CMS.
Would putting prices in TV ads actually help?
While restraining drug price growth for consumers is HHS' goal, several experts expressed skepticism that such a policy would achieve that.
"In general, the administration has not explained clearly how the disclosure of list prices will lead to lower drug prices," Sachs said.
Leerink's Geoffrey Porges predicted in an Oct. 16 note the proposal, if enacted, "would not materially alter the pricing landscape" or lead to significant price cuts.
David Mitchell, president of Patients for Affordable Drugs, said in an interview with BioPharma Dive that he stands with Azar in support of the initiative, citing the benefits of transparency on list prices. But, he's skeptical of the proposal's impact on pricing.
"When all is said and done, doing this will not lower drug prices," Mitchell said. "There's absolutely no evidence anywhere that putting prices on ads will make prices come down."
"If you're doing it to shame pharma," Mitchell continued, "pharma has already proven over and over again it's happy to be shamed all the way to the bank."
On the other side, Leerink's David Larsen speculated the requirement would add additional pressure to "already heightened scrutiny on ever rising prices" if it was implemented. This would make drugmakers "less likely to raise list prices," he concluded.
Will PhRMA sue?
It's likely. PhRMA, which represents most large pharmaceutical companies, has strongly resisted including list prices directly in TV ads.
When the Trump administration first broached the idea earlier this year, the trade lobby filed a comment indicating it believes any requirement would raise a number of legal issues, including First Amendment concerns.
PhRMA CEO Stephen Ubl reiterated that opposition on a call with reporters Monday, noting the group continues to see significant problems to a rule compelling price disclosure.
While he wouldn't say definitively whether PhRMA would sue to stop a regulation from taking effect, it's clear the administration faces a confrontation with industry.
Ubl did say that PhRMA wouldn't be able to take any legal action until the rule is finalized. The draft is subject to a 60-day comment period.
The administration appears to be expecting a challenge, too. In the proposed rule, Health and Human Services laid out its case for why such a rule would comply with First Amendment legal precedent.
"It's not as if the administration hasn’t been hearing PhRMA’s arguments for months now," said Sachs. "They knew they had to prepare for it."
Why did the Trump administration choose to make this a signature proposal?
The Trump administration has picked up the pace of its drug pricing initiatives in 2018, but many of its actions remain incremental. Given the profile of this requirement — and the industry's likely opposition — the policy could become a defining proposal for the White House's policy platform.
It's worth asking, then, why the administration chose to push this forward.
Frustration with the industry's role in addressing rising drug prices could be one factor, according to Height Capital Markets analyst Andrea Harris. But she also noted that the rule may be "an attempt to appeal to President Trump's populist base" before the Nov. 6 midterm elections.
Trump could claim the announcement as tangible action on prices, and evidence of his administration's commitment to the issue.
Mitchell also suggested political motivations could be behind the move, although he said that's not necessarily a negative as it shows a political response to a hot-button issue.
Choosing to fight this battle, though, might mean less resources can be spent on pushing toward other goals, such as reforming rebating or patent law.
Which drugmakers would hate this most?
The pharma industry spends billions of dollars on TV ads for their drugs. It's one of the main channels for direct-to-consumer marketing, alongside the print ads that fill the pages of the magazines in doctor's offices everywhere.
Including drug costs in those TV spots would be an unwelcome addition for companies already under scrutiny for their pricing practices.
The discomfort of price transparency, though, would mainly be felt by two dozen or so large drugmakers who advertise on TV heavily, according to estimates from HHS.
Pfizer, AbbVie and Eli Lilly are among the large pharmaceutical companies that have advertised on TV the most through the first nine months of 2018, data from TV analytics firm iSpot.tv shows.
AbbVie, for example, is estimated to have spent more than $200 million on ad spots for its blockbuster drug Humira (adalimumab).
Other drug brands with more than $100 million in 2018 ad spending include Pfizer's Lyrica (pregabalin) and Xeljanz (tofacitinib), Eli Lilly's Trulicity (dulaglutide), J&J's Xarelto (rivaroxaban) and Celgene's Otezla (apremilast), according to iSpot.tv data.
Leerink's Porges suggested that price disclosure, if enacted, would cause drugmakers to rethink their approach to marketing.
"It would result in a wholesale abandonment of video and TV advertising, to the detriment of what's left of mainstream broadcast media, but would ultimately only affect a small handful of products where marketers concluded that the headaches and embarrassment of list price disclosure were outweighed by the positive effects of disease treatment or brand awareness," Porges wrote in an Oct. 16 note.