February 25, 2020

February 25, 2020

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February 24, 2020

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Federal Judge Vacates Final Rule on Drug Pricing Transparency in Consumer Advertising

In a Memorandum Opinion, Judge Amit P. Mehta, of the U.S. District Court for the District of Columbia, vacated a U.S. Department of Health and Human Services (HHS) Final Rule, just days before its July 9 effective date. The Final Rule would have required the list prices of prescription drugs to be included in direct-to-consumer advertisements.

The Final Rule

The Final Rule had its roots in the 2018 Trump Administration blueprint titled American Patients FirstThe Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, which described a transparent drug pricing system designed to lower high prescription drug prices and bring down out-of-pocket costs. The Final Rule required direct-to-consumer television advertisements to include the list price of prescription drugs and biological products distributed in the US that are reimbursable by Medicare or Medicaid, whether directly or indirectly. For a discussion of the Final Rule, click here.

The District Court Decision

The decision was a ruling on a motion to stay that was consolidated into a motion on the merits, in a lawsuit brought by drug manufacturers and a marketing trade association against HHS, the HHS Secretary, and the Centers for Medicare and Medicaid Services Administrator. The plaintiffs’ primary arguments were:

(1) HHS exceeded its authority because Congress did not grant it the power to regulate drug marketing under the Social Security Act (SSA), and

(2) the Final Rule violated the First Amendment.

Judge Mehta found that HHS lacked the statutory authority under the SSA to adopt the Final Rule, and did not reach the First Amendment challenge. Judge Mehta applied Chevron USA, Inc. v. Natural Resources Defense Council, and concluded that the SSA did not expressly or implicitly grant HHS the authority to compel pharmaceutical companies to disclose the wholesale price of a marketed drug in television advertisement.

Social Security Act

Judge Mehta analyzed provisions of the SSA and found a common thread, that each provision contains a “congressional directive that concerns the day-to-day running and operation of Medicare and Medicaid as public health insurance programs, and each is directed in some way to a program participant or the program itself.” He reasoned that none of the provisions “authorize HHS, in the name of attempting to reduce costs, to regulate the health care market itself or market actors that are not direct participants in the insurance programs,” concluding that “the SSA unambiguously does not delegate to HHS the power to promulgate” the Final Rule.

Food, Drug and Cosmetic Act

Judge Mehta also took a close look at the Food, Drug, and Cosmetic Act (FDCA), which vests certain powers in HHS to regulate drug advertising, which HHS has, in turn, delegated to the Food and Drug Administration (FDA). He noted that the FDCA provisions contain specific advertising content-related requirements, which do not include drug list price information. He concluded, “Congress deliberately and precisely legislated in the area of drug marketing under the FDCA. Such purposeful action demonstrates that Congress knows how to speak on that subject when it wants to. It is, therefore, telling that the SSA contains no provisions concerning drug marketing. The SSA’s different purpose cannot overcome the statute’s silence.”

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About this Author

Melissa Lisa Thompson Health Lawyer Robinson Cole Law Firm

Lisa Thompson advises companies, senior management, and their boards of directors, with a focus on the health care, life sciences and technology industries. She is a member of the firm’s Health Law Group and Data Privacy + Cybersecurity Team.  She is also an arbitrator on the Commercial panel and the Health Care panel of the American Arbitration Association.  

Health Care, Life Science and Technology Industries

Lisa represents domestic and international clients in the health care, life science and technology industries, including pharmaceutical companies,...