FDA-Mandated Listing of Drug Prices in Ads Would Flunk Legal and Constitutional Tests

first-amendmentWe’ve read with amusement the recent, overblown claims of some constitutional-law commentators and even U.S. Supreme Court justices that the First Amendment has been “weaponized” as a tool of deregulation. Of course, First Amendment challenges increasingly have become indispensable as politicians and regulators target more and more speech rather than regulate conduct directly.

Consider, for instance, the advertising-disclosure requirement floated last May as a part of the Department of Health and Human Services’ (HHS) blueprint to lower prescription drug prices. HHS asked the Food and Drug Administration (FDA) “to evaluate the inclusion of list prices in direct-to-consumer advertising.” The proposal appears to be under serious consideration. HHS Secretary Alex Azar has specifically invoked it when briefing the press and testifying before two Senate committees (here and here). And FDA Commissioner Scott Gottlieb indicated (in a May interview) that an agency working group will soon study the idea.

If that study includes a dispassionate legal and constitutional analysis, the working group should recommend that HHS scrub the list-price mandate from its policy blueprint. Not only does FDA lack the statutory authority to impose the mandate, but even if it could legally do so, the regulation cannot survive a First Amendment challenge.

Lack of Statutory Authority

A 1962 amendment to the Food, Drug, and Cosmetic Act (FDCA § 502(n)) granted FDA regulatory jurisdiction over prescription drug advertisements. FDA issued a set of mind-numbing, rigidly detailed rules (21 CFR Part 202) meant to ensure that the advertisements’ targets—at the time, only physicians—understood each drug’s risks and side effects. In essence, doctor-directed ads had to include almost all of the same information as the drug’s FDA-required label.

But those regulations also apply to consumer-directed drug ads. Even though patients can obtain the advertised drug only with a physician-written prescription, FDA requires that DTC ads include an avalanche of information about a drug’s side effects and contraindications.

Neither the FDCA nor the FDA’s implementing regulation contemplates the mandatory listing of drug prices in print or broadcast ads. And no reasonable interpretation of the law or the rule supports mandatory list-price disclosures. After all, FDA’s legislatively authorized mission is to ensure the safety and efficacy of medical treatments. Congress never indicated that the production cost or sales price of a product are relevant factors in a drug’s approval and ongoing regulation. Agency actions that go beyond the unambiguously stated intent of Congress merit no deference under Chevron v. United States, so a court would likely find any list-price mandate as arbitrary and capricious under the Administrative Procedure Act (APA).

HHS Secretary Azar has asserted that pricing-information disclosure falls under the need for advertisements to contain “fairly balanced” information. FDA’s demand for “fair balance” grew out of the FDCA requirement of a “brief summary” of a product’s clinical benefits and risks. Yet the agency has never interpreted that regulation to mean that a drug’s price may be weighed along with side effects and contraindications in balancing an advertisement’s effectiveness claims. In fact, as recently as a June 2018 guidance document, FDA stated that companies should not communicate health-economics information to “health care providers who are making individual patient prescribing decisions or consumers.”

FDA’s past, reasonable interpretation of its own regulations seriously complicates any attempt to justify the price-disclosure mandate as part of the agency’s fair-balance requirement. A reviewing court would likely find the new interpretation violates the APA.

Constitutionally Infirm

Drug advertising is perhaps the most highly regulated type of product promotion in America. Pharmaceutical companies have mostly decided to comply with, rather than challenge, federal speech regulations—including “voluntary” FDA pre-clearance of ads—that are constitutionally suspect. Given that the price-disclosure mandate appears designed to significantly chill DTC drug advertising, manufacturers would almost certainly stop acquiescing and test the FDA’s disclosure requirement in court.

The price-disclosure mandate targets advertising to consumers; singles those ads out for restrictive treatment, not because they are false or misleading, but because they discuss FDA-regulated drugs. Such content-based discrimination of truthful speech, even if it is commercial in nature, should be subject to strict scrutiny, a standard that few speech regulations can meet. Though courts have resisted that argument, the Supreme Court’s 2018 NIFLA v. Becerra decision, as we argued here in a July 5 post, may presage a new First Amendment regime for commercial speech.

Even if a court was unwilling to apply strict scrutiny to the disclosure mandate, the requirement could not withstand scrutiny of Zaunder v. Office of Disciplinary Counsel. There, the U.S. Supreme Court upheld a speech requirement that advances the government’s interest in preventing consumer deception, conveys only purely factual and uncontroversial information, and is not unduly burdensome.

The rule at issue is not meant to allay consumer confusion. Its goal rather is to, somehow, reduce the cost of prescription drugs. But as Sorrell v. IMS Health makes clear, that is not a sufficient reason to violate free-speech rights. Even if the mandate were aimed at preventing consumer deception, it would fail. If anything, the disclosure it requires would create confusion. As one commentator asked, what would be listed: the price for a single dose, the cost of a standard course of treatment, or the annual price for treatment?

Besides, the vast majority of patients don’t pay the list price. It is little more than a beginning point for negotiation with pharmacy benefit managers, insurance companies, employers, the federal government, and others who cover some or all of the cost of consumers’ prescription drugs. Compelled disclosure of a drug’s list price, though in the abstract “purely factual,” is misleading in isolation. And because courts must assess whether information is “uncontroversial” to pass First Amendment muster, a misleading disclosure can never further the government’s interest.

Conclusion

How prescription drugs are priced is an issue of great public importance. But the role government should play in drug pricing is open for debate. Whatever actions FDA regulators end up pursuing, curbing truthful, non-misleading speech about lawful products should always be the last resort.

The cost of silencing communication, not only to the First Amendment principles we cherish, but to our personal health, is unacceptably high. Federal health officials and any FDA attorneys assigned to the drug-price-disclosure working group should reread, or read for the first time, Justice Kennedy’s majority opinion in Sorrell, in which he noted that a “’consumer’s concern for the free flow of commercial speech often may be far keener than his concern for urgent political dialogue.’ …  That reality has great relevance in the fields of medicine and public health, where information can save lives.”

Also published by Forbes.com on WLF’s contributor page.

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