Appeals court nixes HHS’s drug price disclosure rule

More than a year after the Department of Health and Human Services finalized a rule that would require drugmakers to include pricing information in TV ads, the rule continues to be mired down in court challenges.

In the latest blow, a three-judge federal appeals court has ruled that the HHS does not have the authority to compel the price disclosures. The decision affirms a previous ruling by a federal judge last summer in response to a lawsuit filed by Merck & Co., Eli Lilly & Co. and Amgen Inc..

Related: Federal judge shoots down rule requiring drug price disclosures in TV ads

“The Department’s construction of the statute would seem to give it unbridled power to promulgate any regulation with respect to drug manufacturers that would have the arguable effect of driving down drug prices—or even health care costs generally—based on nothing more than their potential salutary financial benefits for the Medicare or Medicaid program,” the judges wrote.

The judges questioned whether the rule would have its intended effect of driving down prices, and cited four reasons it fell outside the scope of the duties of the HHS:

1. “List prices” for drugs have little bearing on what consumers actually pay for the drug.
2. The administration can’t support its claim that disclosures “may inform” consumers’ health care decisions
3. The rule targets the general public and not Medicare and Medicaid recipients, underscoring the “marginal relevance” of the list price disclosures.
4. The breadth of authority being claimed by the HHS ”underscores the unreasonableness of the Department’s claim that it is just engaged in general ‘administration.’”

The ruling is a blow to the Trump administration and its plan to bring down drug prices. It may also serve as a bellwether for the fate of another administration rule that will require hospitals to disclose prices beginning next year. While the rule requires negotiated rates as opposed to list prices–a key difference between the two rules–other arguments made by the drugmakers could also be used by the hospital groups involved in the price transparency challenge.

Another commonality between the two cases is the assertion that price disclosures violate the affected companies’ First Amendment rights–an issue that was not addressed in either the federal judge’s ruling or that of the appeals court.

Read more: 

• Eli Lilly says ‘no’ to TV list prices but offers a compromise
• What does the FDA think of Instagram influencers and medical promotions?
• TV list prices for drugs could be a turnoff for consumers, study says