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Appeals panel backs lower US court in blocking drug price disclosures in TV ads

SNL ImageA federal appeals court upheld a district judge's ruling that blocked the Trump administration from requiring drugmakers to disclose the list prices of their products in TV commercials aimed at consumers.

The June 16 decision by a three-judge panel from the U.S. Court of Appeals for the District of Columbia Circuit in Washington was another blow to President Donald Trump's vow to Americans that he would lower drug prices — a promise he has fallen short on since entering the White House in January 2017.

The U.S. Department of Health and Human Services had sought to require brand-name drugmakers to include in TV ads the list price for a 30-day supply of any medicine costing over $35 that is covered by Medicare and Medicaid. HHS Secretary Alex Azar had suggested that requiring list prices in TV ads could shame drug companies into lowering them.

The ad requirement was set to go into effect July 9, 2019. But hours before that deadline, Judge Amit Mehta of the U.S. District Court for the District of Columbia declared that HHS had exceeded its authority in establishing the rule — a decision that sided with Amgen Inc., Eli Lilly and Co. and Merck & Co. Inc. The three drugmakers were joined in their lawsuit by the Association of National Advertisers.

In their complaint, the drug companies argued that forcing manufacturers to disclose list prices in TV ads would mislead and confuse U.S. consumers about what they would pay for their medicines out of pocket and that the requirement failed to account for the differences among insurance, treatments and patients themselves.

The list price may end up being "multiple times higher than the out-of-pocket price that a substantial majority of Americans would pay for the advertised products," the companies said. "Far from promoting transparency and improved decision-making, therefore, the rule would instead force pharmaceutical companies to mislead tens of millions of Americans about the price they would actually pay for important medicines that might improve their health or even save their lives."

'Anchor point'

Arguing before the appeals court judges on Jan. 13, the Trump administration's lawyer, Ethan Davis, principal deputy assistant attorney general at the U.S. Department of Justice, admitted the list price is "rarely paid" by Americans, particularly people with private health insurance or beneficiaries in the federal government's Medicare and Medicaid programs.

But disclosing the list price would allow consumers to have an "anchor point" to gauge how much they may end up paying out of pocket, Davis told the court. Davis likened disclosing list prices to the automobile industry putting the manufacturer suggested retail price — the sticker price — in TV commercials for new cars.

The appeals court judges did not buy that argument, stating that in an "overwhelming majority of cases," the prices HHS was trying to compel drug manufacturers to disclose "bears little resemblance" to what Medicare and Medicaid beneficiaries actually pay for their medicines.

While the HHS secretary's administrative authority is "undoubtedly broad," it is "not boundless," and "does not allow him to move the goalposts to wherever he kicks the ball," the appeals court panel said in its unanimous ruling, authored by Judge Patricia Millett.

HHS acted "unreasonably in construing its regulatory authority to include the imposition of a sweeping disclosure requirement that is largely untethered to the actual administration of the Medicare or Medicaid programs," the appeals judges said. "Because there is no reasoned statutory basis for its far-flung reach and misaligned obligations, the disclosure rule is invalid and is hereby set aside."

However, the court emphasized that there was nothing in its opinion that holds that the HHS secretary was categorically foreclosed from regulating pharmaceutical advertisements.

"We leave that question for another day and hold only that no reasonable reading of the department's general administrative authority allows the secretary to command the disclosure to the public at large of pricing information that bears at best a tenuous, confusing, and potentially harmful relationship to the Medicare and Medicaid programs," the judges wrote.

In response to the ruling, Michael Caputo, HHS assistant secretary for public affairs, tweeted that "if the drug companies are embarrassed by their prices or afraid that the prices will scare patients away, they should lower them."

HHS did not respond to questions about whether it would appeal the June 16 ruling.

Amgen, Lilly and Merck did not immediately respond to requests for comment on the ruling.