HHS Drug Price Advertising Proposal Reveals Sweeping View of Government Power over Private Speech

Featured Expert Contributor, First Amendment

By Megan Brown, a Partner with Wiley Rein LLP, with Bert Rein and Steve Obermeier, Partners with the firm.

Ed. Note: This is Ms. Brown’s inaugural post as the WLF Legal Pulse’s latest Featured Expert Contributor.

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The Department of Health and Human Services has proposed a new rule to “require direct-to-consumer (DTC) television advertisements of prescription drugs and biological products for which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or ‘list price’) of that drug or biological product.”  Put more simply, if a drug company runs a TV ad, it will have to include the “list price” of the drug, even though that is not what consumers or insurers would pay.  The proposed rule’s stated goal is to ensure that “beneficiaries are provided with relevant information about the costs of prescription drugs and biological products so they can make informed decisions that minimize not only their out-of-pocket costs, but also expenditures borne by Medicare and Medicaid.”

The HHS proposal takes a shockingly permissive view of the government’s ability to compel advertising disclosures.  The NRPM states that “[w]hen the government requires accurate disclosures in the marketing of regulated products under appropriate circumstances, it does not infringe on protected First Amendment interests.”  It further states that the government may compel any disclosure “where the disclosure advances a government interest and does not unduly burden speech.” This is a remarkable embrace of the more aggressive formulations of government power to compel speech, espoused by several state and local governments that have tried to mandate that various warnings and messages be disseminated by the private sector.

The NPRM principally justifies this broad mandate by citing Zauderer v. Office of Disc. Counsel and Milavetz, Gallop & Milavetz v. U.S., two cases in which additional disclosures in professional advertising were considered necessary to cure deceptive or potentially misleading claims in advertising.  The NPRM also invokes Red Lion Broadcasting Co. v. FCC to claim special regulatory power over broadcast speech.  But that case is premised on the alleged scarcity of capacity to reach consumers electronically and is outmoded by modern communications technology.  Fundamentally, it seems to have no bearing on this agency’s power to control private speech.

The NPRM ignores recent Supreme Court commercial speech jurisprudence like IMS Health Inc. v. Sorrel and NIFLA v. Becerra (click here to see our WLF Legal Backgrounder on that decision) that take a more limited view of government authority over commercial speech under the First Amendment.  It also ignores the harmonized view of the First Amendment protection afforded to commercial and non-commercial speech as advocated by Justice Clarence Thomas.

The NPRM’s premise is almost certain to be challenged legally.  It is vulnerable because the linkage between the required disclosure and the advancement of the government’s interest in reducing prescription drug prices is tenuous at best.  For an Administration otherwise committed to eliminating reliance on questionable scientific and economic analysis as justification for government intrusions into the private sector, this seems to be a surprising elevation of expedience over principle. Even under the loose test that compelled disclosures must be factual and non-controversial, the proposal seems doomed.

HHS acknowledges that the list prices to be disclosed are not the prices any consumer would pay and, indeed, could mislead a consumer into declining to consult a physician about a drug that seems to be out of her price range when the actual payment to be made by the consumer, if insured, would be much lower.  And while the NPRM asserts that drug manufacturers would have the ability to convey additional explanatory information in their broadcast advertising, that assertion is likely to be contested given the limited duration of broadcast commercials and the complexity of drug pricing as it impacts consumers.  An opportunity to engage in counter-speech does not cure the problem of the initial government intrusion into the communication.

HHS and the government have myriad alternatives available to try to achieve their goals.  Among others, an initiative tailored to giving prescribing physicians better access to prescription drug prices would seem far better suited to enhancing price competition in the market as well as less of a burden on manufacturer speech.  Speech regulation is supposed be a last—not a first—resort.

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