In June 2019, several drug manufacturers filed a lawsuit against the United States Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) over a recent requirement that forces manufacturers to disclose the list prices of medications in television advertisements. The lawsuit, filed by Amgen Inc., Merck & Co. Inc., Eli Lilly and Co., argues that the requirement from HHS violates the companies’ freedom of speech under the United States Constitution and exceeds the agency’s statutory authority. The Association of National Advertisers also joined the companies in filing the suit.
The HHS Rule
The HHS rule, finalized in May, is set to go into effect on July 9, 2019. The rule required drug manufacturers to include in their TV ads the list price for a 30-day supply of any medicine that costs over $35 and is covered by Medicare and Medicaid. The ads must also state, “If you have health insurance that covers drugs, your cost may be different.”
According to the press release announcing the finalization of the rule, “List prices matter to patients, many of whom either pay the list price or prices based on the list price. For the forty-seven percent of Americans who have high-deductible health insurance plans, the price they see in ads essentially is the price they pay, until they meet their deductible. All seniors on Medicare Part D have coinsurance for certain types of drugs, which means their out-of-pocket expenses are calculated as a share of list price. List prices are also what patients pay if a drug is not on their insurance formulary.”
The Complaint
The complaint, filed in the U.S. District Court for the District of Columbia, argues that by advertising the list prices, it would mislead and confuse consumers about what they would pay for their medicines out of pocket. They also argued that the requirement did not account for the differences among insurance, treatments, and the patients themselves, saying, “Americans deserve accurate information about the price they will pay for prescription drugs.”
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 drug 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.”
Amgen, Lilly and Merck have all supported a voluntary approach to publishing list prices, as established by the Pharmaceutical Research and Manufacturers of America (PhRMA) to have companies include information in their TV ads that point consumers to websites and other resources where they may find publicly available information. They believe that the PhRMA approach “provides patients with much-needed transparency about the pricing that is actually relevant to them, rather than providing them with a gross wholesale price that is typically several times higher than what a patient would actually pay.”
Amgen Statement
Amgen released a statement to coincide with the filing of the lawsuit, noting its belief that patients do need clear and relevant information to understand what they are paying for medicines. However, Amgen clearly disagrees with the HHS rule. In the statement, the company states, “What Amgen doesn’t agree with is a government-prescribed approach as required in the new DTC rule. Not only does the rule raise serious freedom of speech concerns, it mandates an approach that fails to account for differences among insurance, treatments, and patients themselves, by requiring disclosure of list price.”
Judge Rules, Preventing the Rule from Taking Effect
On Monday, July 8, 2019, United States District Court Judge Amit Mehta ruled that HHS lacks the authority to require drug manufacturers to post list prices in pharmaceutical DTC television advertisements.
Mehta found the arguments by the pharmaceutical companies to be persuasive and found the rule invalid. He stated his belief that “the costs imposed by the WAC Disclosure Rule amount to a rounding error for the pharmaceutical industry,” but ruled that “that argument misses the point. It is the agency’s incursion into a brand-new regulatory environment, and the rationale for it, that make the Rule so consequential. To accept the agency’s justification here would swing the doors wide open to any regulation, rule, or policy that might reasonably result in cost savings to the Medicare and Medicaid programs, unless expressly prohibited by Congress.”
In his opinion, Mehta addressed the fact that Congress did not delegate authority to HHS under the Social Security Act to compel drug price disclosures. He made further note that Congress has legislated on DTC advertising of pharmaceutical several times under the Food, Drug and Cosmetic Act, but HHS chose the CMS – instead of the FDA – as the issuing sub-agency for the rule.