On December 4, 2020, the Pharmaceutical Research and Manufacturers of America (PhRMA) – along with the Association of Community Cancer Centers, the Global Colon Cancer Association, and the National Infusion Center Association – filed a lawsuit in the United States District Court for the District of Maryland, asserting that the Most Favored Nation Interim Final Rule: exceeds the statutory authority given to the Centers for Medicare and Medicaid Services (CMS), raises constitutional questions, and fails to follow proper rulemaking procedures.
The MFN Rule links reimbursement for the top 50 physician-administered medicines to the lowest price available in 22 foreign countries in the Organization for Economic Co-operation and Development (OECD). The lawsuit alleges that one of the problems with this approach is that the foreign countries either impose government price setting, have single-payer health care systems, or otherwise make value judgments about quality of life unrelated to the United States healthcare system. PhRMA also believes that government price setting is “detrimental to patient access to innovative medicines,” and notes that almost 90% of new medicines that have been launched since 2011 are available in the United States while only 49% of those same new medicines are available for some of the countries included in the MFN Interim Final Rule.
Statutory Violation
The lawsuit takes issue with the Administration’s position that Congress allowed it to overhaul the drug pricing system for Medicare Part B through a provision found in the Affordable Care Act. According to the lawsuit, that provision only gives the Administration the ability to “test innovative payment and service delivery models,” not rewrite the entire pricing rules of the Medicare Part B program on a nationwide, mandatory basis. Therefore, the complaint alleges that the Administration does not have the authority to enact the “far-reaching, comprehensive statutory overhaul” included in the Rule.
Constitutional Violation
The lawsuit also alleges that even if Congress did give the Administration the authority it believes it has, the delegation should be considered unconstitutional because the executive branch is not allowed to override previously enacted statutes through rulemaking.
The lawsuit states that by putting forth the Rule, CMS “used its purported authority to repudiate Congress’s market-based approach to Medicare Part B drug pricing, the patent laws, and other legislation,” instead of following a “congressionally enacted ‘intelligible principle’ to which the HHS Secretary was ‘directed to conform’.” The Constitution instead requires such significant changes be made through the proper Congressional process and then signed into law by the president.
Procedural Violation
Finally, the lawsuit alleges that by introducing the rule as an interim final rule, the Administration deprived the public of any change to weigh in before the policy takes effect. In a statement released by PhRMA, the plaintiffs have referred to this move as an “end run around the usual process” by which “agencies are held accountable to the public.” Interim final rules are supposed to be used only if there is “good cause” for implementing a rule without a notice and comment period.
The lawsuit does note that the Administration cited concerns with drug pricing and the COVID-19 pandemic as its reasons for good cause. However, the plaintiffs argue, that cannot be entirely true as the Interim Final Rule excluded all COVID-19 treatments from the scope of the rule (because of delays in access to drugs that are market-ready). Further, neither the Rule nor the Administration gave any explanation as to why if drug pricing was such an issue, they waited more than 2 years after the advance notice of proposed rulemaking on the international reference pricing index to actually issue to the MFN Rule.
The lawsuit seeks to enjoin enforcement of the MFN Interim Final Rule, in addition to a declaration that the rule is unconstitutional and invalid and other appropriate relief.
PhRMA Statement on the Lawsuit
PhRMA Executive Vice President and General Counsel James C. Stansel released a statement about the lawsuit reiterating some of the main points included within, saying,
“The Most Favored Nation Interim Final Rule is bad policy that is contrary to law and that the administration expressly admits will disrupt patients’ access to medicines. By pushing through a nationwide, mandatory policy change, the administration is essentially rewriting the Medicare statute. It is circumventing Congress entirely, ignoring the roles assigned to the executive and legislative branches. The U.S. Constitution is clear: The administration does not have the legal authority to write new laws or override existing laws through regulations. Laws must be passed by both chambers of Congress and signed by the president. By proceeding with an interim final rule, the administration has also deprived the American public of their right to provide input on these drastic changes before they are implemented. Alarmingly, they have used COVID-19 as a baseless pretext for skipping normal rulemaking, having delayed the issuance of a proposed rule for nearly two years. The MFN Interim Final Rule should be stopped from moving forward immediately before it can cause irreparable harm.”