Skip Navigation

Federal Court Strikes Down Trump Rule on Drug Prices in TV Ads

August 20, 2019

The Trump administration’s plans to promote transparency in drug pricing suffered a significant, if not entirely unexpected,

legal setback July 9 when the U.S. District Court for the District of Columbia struck down a rule requiring drug makers to disclose prices in direct-to-consumer (DTC) television advertisements.

Specifically, the rule would have required pharmaceutical companies to disclose the list price for the standard monthly dose of a given drug in any DTC advertising. 

Handing down its decision on the very day the administration’s rule was set to go into effect, the court held that Congress had not given the Department of Health and Human Services (HHS) the express authority to force drug makers to disclose the prices of drugs in direct-to-consumer advertisements.  

The court further noted that the Food and Drug Administration; the Food, Drug and Cosmetic Act; and HHS can regulate the content of drug advertising to ensure pharmaceutical companies do not make false claims about their products’ safety or efficacy.  

Government Oversteps Authority

However, drug pricing involves finance and public insurance, both of which are regulated under the Social Security Act via the Centers for Medicare and Medicaid Services, District Judge Amit Mehta noted. As such, the government overstepped its authority, he ruled. 

Merck & Co., Eli Lilly, Amgen, and the National Association of Advertisers sued HHS shortly after the rule was finalized in May, saying it violated their First Amendment right to free speech, and challenging HHS’s authority to regulate price transparency in advertising. 

In a statement, HHS spokeswoman Caitlin Oakley said President Trump and HHS Secretary Alex Azar remain committed to pushing drug transparency.

 “Although we are not surprised by the objections to transparency from certain special interests, putting drug prices in ads is a good way to put patients in control and lower costs, and as seen from the President’s executive order, we are working on many different avenues to deliver transparency,” Caitlin said.

The White House was even more direct in its criticism of the ruling. “It is outrageous that an Obama-appointed judge sided with big Pharma to keep high drug prices secret from the American people, leaving patients and families as the real victims,” White House Spokesman Judd Deere said in a statement. 

Drug Industry Aims to Do Better

Although pleased with the court’s ruling, representatives of the pharmaceutical industry were eager to burnish their own credentials when it comes to price transparency.

“Patients need more transparency about their medical costs, which is why we updated our DTC Principles and our member companies voluntarily began in their DTC television advertising to direct patients to links to cost information,” the industry trade group Pharmaceutical Research and Manufacturers of America said in a statement.

Drug companies have long argued that list prices do not account for the actual prices paid by consumers after discounts and rebates negotiated with health insurers and pharmacy benefit managers.

Rule of Law Prevails

The decision to stop HHS from requiring drug makers to disclose list prices in TV ads makes sense, says Charles Silver, Cato Scholar, professor at the University of Texas School of Law, and co-author of Overcharged: Why Americans Pay Too Much for Health Care. 

     “Judge Mehta’s point that HHS has statutory authority to administer the Medicare and Medicaid programs, not to regulate the market in which medical treatments are sold, is well taken,” Silver said.“Ensuring that federal agencies operate within the boundaries set by Congress is a core function of the federal judiciary, which is charged with protecting Americans from unlawful excesses of executive power.”

The decision was in sharp contrast to White House response, Silver says.  

“(The) effort to tarnish Judge Mehta and undermine the courts’ authority by referring to him as an Obama nominee is yet another example of Trump’s disdain for the rule of law,” Silver said.

There is an avenue for change, Silver says.

“Congress can easily solve the problem Judge Mehta identified by giving HHS the authority to promulgate a rule requiring price disclosures,” Silver said. “Given how reviled drug makers are, such a proposal should enjoy bipartisan support.  

A Loss for Consumers?

The decision is a defeat for consumers, says Ge Bai, associate professor at Johns Hopkins University’s Carey School of Business, where she specializes in health care pricing and cost management.

     “Consumers have a right to know what the drugs they need really cost,” Bai said. “The rule represented a counterforce to the power of pharmaceutical companies in setting their prices.”

Silver says it might be better to consider why drug prices are a problem in the first place.

“Why do drug companies have to be forced to disclose prices?” Silver said. “Other sellers advertise prices willingly to attract buyers.”

“Drug prices are industry secrets because drug makers can’t gain business by disclosing them,” Silver said. “As long as consumers rely on Medicare, Medicaid, and insurers to buy drugs for them, that won’t change.”

Silver says there may be a better alternative to forced transparency.

“In the retail sector, where people buy all sorts of over-the-counter medications at places like Costco and CVS, prices are both advertised and low,” Silver said. “HHS should work with the FDA to move as many prescription drugs as possible to over-the-counter status.”

 

Bonner R. Cohen,  Ph.D., (bcohen@nationalcenter.orgis a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).

Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org