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Trump Administration Continues Fight for Drug Prices in TV Ads

Nov. 26, 2019, 6:59 PM

The Department of Health and Human Services maintains that it has the power to require drug companies to disclose list prices in television advertising, according to a final brief filed in the U.S. Court of Appeals for the District of Columbia Circuit.

Judge Amit P. Mehta of the U.S. District Court for the District of Columbia reached a “mistaken conclusion that HHS lacks statutory authority to promulgate the rule,” government lawyers argue in the brief filed Nov. 25.

The HHS is appealing Mehta’s July 8 decision that said the agency lacked statutory authority to issue the rule.

The case comes as the Trump administration—and both parties in Congress—are seeking ways to bring down the cost of medication. The case, which raises First Amendment questions, will be a test of the federal government’s authority to impose new rules on the pharmaceutical industry via the Social Security Act.

Lawyers representing Merck & Co., Eli Lilly and Co., and Amgen, along with the Association of National Advertisers, are seeking “at minimum” a stay on the rule’s effective date, which was originally set for July 9 and now remains up in the air.

Rule Said to Address ‘Crisis’

The HHS argued that it introduced the rule “to mitigate a crisis in prescription drug costs that threatens the sustainability of Medicare and Medicaid.”

“In promulgating the rule, the agency relied on grants of rulemaking authority that are ‘far-ranging’ in scope,” according to the latest filing.

Lawyers for the HHS note that the agency imposed the rule in its capacity as an insurer, “tailoring” the requirement to apply exclusively to drug manufacturers that make their products available through Medicaid and Medicare.

Lawyers for the drugmakers also filed a final brief on Nov. 25, reasserting their argument that the Trump administration’s approach to lowering drug prices “hit a snag: FDA has long recognized that the statute authorizing it to regulate some aspects of pharmaceutical advertising—the Federal Food, Drug, and Cosmetic Act—does not authorize it to compel pharmaceutical manufacturers to disclose a drug’s price.”

They note that the government has instead turned to the Social Security Act to make its case that displaying a drug’s list price in television advertising might “indirectly” lead to lower-cost medications.

“This is agency overreach, plain and simple,” lawyers representing the drug companies wrote.

“If Congress wished to give HHS the authority to regulate anything that might conceivably affect healthcare prices in the United States, it would not have buried that breathtaking power in generalized provisions giving HHS the authority to operate public programs,” according to the drugmakers’ filing.

Compelled Speech?

While the lower court focused its decision on the question of the HHS’ rule-making authority, the First Amendment is also a closely watched element in the case.

Lawyers for the drugmakers argue that the government cannot compel speech by requiring them to include the list price—particularly because that number can be misleading. Actual out-of-pocket costs vary dramatically depending on an individual’s insurance coverage and other factors. Few consumers ever pay the list price for medication.

The HHS notes that commercial speech is afforded less constitutional protection than other forms of speech, and it maintains that the rule doesn’t violate drugmakers’ First Amendment rights.

The new “rule requires pharmaceutical advertisers to include two sentences of purely factual and uncontroversial information about drug prices,” according to the government’s brief.

Arguments in the case will be heard on Jan. 13.

The case is Merck & Co., Inc., et al v. HHS, D.C. Cir., No. 19-05222, final briefs filed 11/25/19

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Randy Kubetin at rkubetin@bloomberglaw.com

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