Judge Vacates Administration's Rule on Drug Prices in Advertising

The United States District Court for the District of Columbia has vacated the Trump administration’s rule requiring the disclosure of wholesale acquisition costs (WACs) for drugs in direct-to-consumer television advertising. The rule had been slated to take effect today, July 9.

The rule would have required drug manufacturers to disclose their list prices for pharmaceutical products or biologics in television ads for drugs covered by Medicare or Medicaid if the WAC, or list price, is $35 or more for a month’s supply.

US District Court Judge Amit P. Mehta handed down the ruling yesterday, July 8, in a decision on a case brought by Merck, Eli Lilly, Amgen, and the National Association of Advertisers. According to the drug makers, the rule used “unprecedentedly broad construction of the agency’s statutory authority,” violated the First Amendment, and would have created confusion among consumers because most patients will not likely pay list prices for their therapies.

According to the decision in the case, HHS sought, in adopting the rule, to do more than exercise its basic power to establish rules and regulations for the running and management of the federal public health programs of CMS.

HHS, says the decision, “has adopted a rule that regulates the conduct of market actors that are not direct participants in the Medicare or Medicaid programs.” While these companies’ pricing decisions do impact Medicare and Medicaid, a reading of the statutory text, says the decision, does not plainly support the idea that Congress intended to give HHS the authority to regulate prescription drug marketing.

Judge Mehta also writes that “it is not lost on the court that HHS has never before attempted to use the [Social Security Act, SSA] to directly regulate the market for pharmaceuticals,” and while “there is a first time for everything,” the court should adopt a measure of skepticism about an agency’s claims to have found in the law the authority to regulate a significant portion of the American economy, given that the rule is “far afield of any other type of rulemaking authority HHS has previously exercised under the SSA.”

The decision did not address the drug makers’ First Amendment challenge.

The administration has the option to appeal the ruling in the case, and Judge Mehta also signaled that Congress could resolve the issue by explicitly giving HHS the authority to require drug price disclosure. “The responsibility rests with Congress,” says the decision, to act on the matter of using such a policy as WAC disclosure to address rising drug costs.