The ruling blocked the final rule, which had been scheduled to take effect Tuesday.
Final rule details
HHS released the final rule in May. The rule would require drugmakers to include list prices in television advertisements for Medicare- and Medicaid-covered drugs if the price for a typical course of treatment or a 30-day supply is greater than $35. The final rule states that the prices should appear in text that is large enough for most people to read, and that the text should include a statement noting that patients with health insurance might pay a different sum for the treatment.
HHS under the rule would maintain and publish a list of pharmaceutical companies that do not comply with the new requirements. Those companies also could be subject to litigation under the final rule.
CMS has estimated that the final rule would affect 25 pharmaceutical companies that run approximately 300 different drug ads on television each quarter. The agency projected that complying with the final rule would cost drugmakers $5.2 million during the first year of implementation and $2.4 million in subsequent years.
Amgen, Eli Lilly, Merck, and the Association of National Advertisers (ANA) last month jointly filed a lawsuit challenging the final rule in the U.S. District Court for the District of Columbia. They argued that the final rule exceeds HHS' statutory authority and violates the First Amendment of the Constitution.
The drugmakers and ANA also claimed that the final rule would have a "misleading effect," because a drug's list price does not represent the amount patients would pay out of pocket for a treatment after discounts, rebates, and other adjustments are applied.
They also argued that HHS did not provide evidence the final rule would lower drug prices, which the Trump administration has claimed is part of the rule's purpose.
Further, the drugmakers and ANA claimed the final rule "would be directly contrary to [the] … best interests" of patients, because list prices "could discourage patients from using beneficial medications."
Judge strikes down, blocks final rule
Judge Amit Mehta of the U.S. District Court for the District of Columbia on Monday ruled that HHS does not have the authority to require manufacturers to disclose their drugs' list prices in TV advertisements, and blocked the final rule from taking effect. Mehta wrote, "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."
Mehta wrote the ruling "does not question HHS' motives in adopting the [rule]" nor "take any view on … requiring drug companies to disclose prices." Mehta wrote, "That policy very well could be an effective tool in halting the rising cost of prescription drugs. But no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized."
Mehta did not rule on whether requiring drugmakers to disclose list prices would violate the First Amendment.
Implications and reaction
"The most likely outcome of the rule would have been confusion among the public," says Lindsay Conway, managing director at Advisory Board. "Very few patients pay the sticker price of the drug, and patients' out-of-pocket expenses vary widely depending on their prescription plan and medications."
She adds that, while the rule would have likely "heightened public discourse on the high cost of drug prices, the general public is already well aware of the high cost of drugs. According to a 2018 Kaiser Family Foundation survey, 80% of Americans say the price of drugs is unreasonable."
Plus, although "transparency is great in theory," says Madhavi Kasinadhuni, senior director at Advisory Board, "patients lack agency to truly 'shop' for prescription drugs. They can ask for lower-cost drugs, but their doctor has to agree to write the prescription and most patients don't have the clinical information or expertise to make a judgment on what treatment is best independently."
HHS and patient advocacy groups said they were disappointed by the ruling.
HHS spokesperson Caitlin Oakley said the administration is "disappointed in the court's decision and will be working with the Department of Justice [DOJ] on next steps related to the litigation."
A DOJ spokesperson did not immediately respond to a request for comment on whether the administration would appeal the judge's ruling, the New York Times reports.
Nancy LeaMond, AARP's chief advocacy and engagement officer, said, "Drug list prices have been shrouded in secrecy for too long." LeaMond said the judge's "ruling is a step backward in the battle against skyrocketing drug prices and providing more information to consumers."
However, Eli Lilly applauded the ruling, saying, "We are committed to working with stakeholders across the health care system to find better solutions for the larger issue, namely, lowering out-of-pocket costs for Americans who still struggle to pay for their medicines" (Abutaleb, Washington Post, 7/8; Diamond, "Pulse," Politico, 7/9; Owens, "Vitals," Axios, 7/9; Weixel, The Hill, 7/8; Thomas/Rogers, New York Times, 7/8; Florko, STAT News, 7/8).