Federal Judge Blocks HHS Rule Requiring Disclosure of Drug Prices in TV Ads

A federal judge on Monday blocked the Trump administration’s rule requiring the disclosure of drug prices in television ads, a day before the rule was set to take effect.

The case, brought by Merck, Eli Lilly, and Amgen, as well as the National Association of Advertisers, argued that the rule exceeds HHS’ statutory authority; is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with the law; and is in violation of the First Amendment.

Judge Amit P. Mehta of the United States District Court for the District of Columbia sided with the groups, ruling that the rule was “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” The ruling did not address the First Amendment argument.

The rule, which was finalized in May, would require drug manufacturers to disclose drug prices for drugs covered by Medicare or Medicaid if the wholesale acquisition cost (WAC) was $35 or more for a month’s supply. HHS believed that it had authority to issue the rule under the Social Security Act (SSA).

“The plain statutory text simply does not support the notion—at least not in a way that is textually self-evident—that Congress intended for the Secretary to possess the far-reaching power to regulate the marketing of prescription drugs,” states the court document.

According to Judge Mehta, HHS Secretary Alex Azar has the authority to establish rules and regulations for public health insurance programs through CMS. However, “HHS seeks to do more than that here. It has adopted a rule that regulates the conduct of market actors that are not direct participants in the Medicare or Medicaid programs,” states the ruling.

Judge Mehta also noted that the court recognizes that HHS has never before attempted to use the SSA to directly regulate pharmaceuticals and that the rule “is far afield of any other type of rulemaking authority HHS has previously exercised under the SSA.”

In addition to the challenge that HHS does not have the statutory authority to issue the rule, the drug manufacturers that brought the case asserted that using the WAC could mislead and confuse customers. They argued that the WAC does not accurately represent what most consumers would pay for a drug after insurance coverage and patient assistance programs.

HHS has previously argued that the WAC serves as a benchmark of cost and that disclosing the amount would open the door for conversations about drug costs between patients and their doctors. The television ads would also include a statement that costs may differ based on coverage.