Don’t Force Drugmakers to Tell People Untrue Things

October 30, 2019
By Timothy Sandefur

This summer, the Trump administration adopted a rule that forces drugmakers who advertise their products to consumer to include in their ads the prices for their medicines.

But not really.

In reality, the rule requires drugmakers to specify the “wholesale acquisition price” of a “typical 30-day regimen” of a drug. The problem is that there actually is no such thing. As we explained back when we first opposed the rule, the term “wholesale acquisition price” refers to a made-up number that rarely has anything to do with the actual amount that a patient has to pay for a medicine. It’s a number provided by the drugmaker that does not refer to an actual sale price, but instead to the starting point of a set of extremely complicated negotiations that include numerous rebates and discounts before the final, actual price is decided upon.

And the rule the administration adopted not only fails to define terms like “wholesale acquisition price” clearly, but the definition that it did use actually contradicts the definition that courts have used. The “wholesale acquisition price” is supposed to mean the price including any discounts—whereas the administration defined the term as not including discounts.

The reality is that medicines are priced in such an extremely complicated way that the administration’s rule simply makes no sense. In fact, it’s more likely to confuse and mislead than to help consumers actually know the prices of medicines. It’s not just us saying that—research published in scholarly journals shows that medicines actually cost as much as 91 percent less than the “wholesale acquisition price” and that the numbers vary so much that the “wholesale acquisition price” is not even a reliable hint of what the real price will be.

That’s important as a constitutional matter because the First Amendment forbids the government from forcing companies to say things about their products that aren’t true. Under the so-called Zauderer Rule, the government can compel businesses to say true things about their products, but because the “wholesale acquisition price” is not actually the price—or anything like the price—of a medicine, the government has no authority to force companies to put it in their ads.

Months ago, pharmaceutical companies sued over the price requirement, and a federal judge in Washington, D.C., agreed with them, striking down the rule on the grounds that the administration has no statutory authority to enforce it. That case is on appeal now, and we filed this brief in the D.C. Circuit asking that court to uphold the trial court’s decision not only for that reason, but also because it’s unconstitutional. (Read more about the case here.)

Maybe it would be a good idea to require drug companies to state the prices of their products in their ads. But the wholesale acquisition price rule simply does not accomplish that. On the contrary, it misleads consumers, prevents doctors from telling patients what they need to know, and violates the free speech rights of pharmaceutical manufacturers.

Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.