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Drug prices in ads? Not so fast: Court strikes down HHS rule at 11th hour

Donald Trump

With a federal court ruling, the Trump administration suffered a blow in its push to force drug companies to put list price in TV ads. (C-SPAN)

Change of plans: Just one day before the Trump administration rule requiring pharma to put drug list prices in TV ads was to go into effect, a federal judge struck it down.

U.S. District Court Judge Amit Mehta vacated the rule Monday on the grounds that the Department of Health and Human Services (HHS) does not have the statutory authority to adopt the rule. The ruling backs the lawsuit filed three weeks ago by Merck, Eli Lilly and Amgen, along with the Association of National Advertisers (ANA), to stop the implementation.

Merck and Lilly both said in statements that they were pleased with the ruling.

“We believe strongly in providing patients and their caregivers the meaningful information they need to make informed healthcare decisions. That is why we initiated this action,” Merck said. 

“We are committed to working with stakeholders across the health care system to find better solutions for the larger issue, namely, lowering out-of-pocket costs for Americans who still struggle to pay for their medicines,” Lilly added.

Because the court invalidated the rule on the plaintiffs’ first complaint regarding HHS’ lack of authority it had claimed under the Social Security Act, the court did not even address the plaintiffs’ second argument that the wholesale acquisition cost disclosure rule violates the First Amendment. That means the plaintiffs still have that argument to make should the Trump administration continue to go forward in court on the issue.

“Neither the (Social Security) Act’s text, structure, nor context evince an intent by Congress to empower HHS to issue a rule that compels drug manufacturers to disclose list prices. The Rule is therefore invalid. In view of this holding, the court does not reach Plaintiffs’ First Amendment challenge,” the judge wrote in the opinion.

The District of Columbia District Court opinion was careful to note that the court did not question HHS’ motives nor did it have an opinion on the wisdom of the rule, and it seemed to kick the ruling question back to Congress.

“No matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized. The responsibility rests with Congress to act in the first instance,” the opinion said.

The ruling is a blow to the Trump administration, which now has the ball in its court. HHS can file an appeal to the D.C. Court of Appeals, or possibly even directly to the Supreme Court. Also looming are the president’s recent promises that he will issue executive orders to lower drug prices. Monday, for instance, President Donald Trump promised a “favored-nation” clause for drugs in a yet-to-be-detailed proposal. (Favored-nation status is typically bestowed by the U.S. on countries who are trading partners, not individual companies.)

The way Dan Jaffe, ANA’s head of government relations, sees it, the administration could go forward in court—but it won’t be easy.

“They ran into a judge who asked them a whole range of very tough questions during the argument, so they’re going to have to go back to the drawing board a bit to see if they have the grounds to go forward,” he said. “My guesstimate is because they’ve taken such a strong position in this area is that they quite likely could go forward. But I think they’re going to keep running into these factual walls and the whole question of authority. It was a very strong statement by the Court that the HHS just does not have that authority.”

Jaffe said if the case does go forward, the plaintiffs’ case remains strong not only on the lack of authority point, but also on what he heard in court arguments over the past days as court skepticism over the constitutionality of the rule.

“From the arguments, the court was highly skeptical of the HHS’ argument that their interest to put in a restriction on speech—the government has to show a substantial interest—the court raised very serious questions during the argument as to whether the HHS had provided any evidence that their interest in blowing up prescription drug prices would be furthered by this rule,” he said. ” … We believe that we would have won on either ground.”

The White House struck back in a statement to The New York Times that took a partisan tone.

“It is outrageous that an Obama-appointed judge sided with Big Pharma to keep high drug prices secret from the American people, leaving patients and families as the real victims,” Judd Deere, spokesman for the White House, told the NYT.

Drug companies did respond to the initial filing of the proposal last year with an industry proposal backed by the PhRMA trade association. PhRMA members agreed to include web addresses in TV ads for specific websites where list prices and more payment information can be found. Pharma companies began doing that this year, with some, such as Johnson & Johnson, also preemptively adding list prices to TV ads along with web addresses. Eli Lilly was the first to add links to its pricing-specific website in January, and now the site includes list prices and other cost information for six of its branded drugs.