The rule from the Department of Health and Human Services requiring drugmakers to include the list price of their products in television ads was struck down by a federal judge.
U.S. District Judge Amit Mehta in Washington, D.C. ruled in favor of pharma companies challenging the rule in court because of what he said was a lack of statutory authority from the HHS to govern drug marketing.
The rule, which was announced by HHS Secretary Alex Azar in May, would require that drug manufacturers disclose the wholesale acquisition cost (WAC) of a 30-day supply of any drug that is covered by Medicare and Medicaid and costs at least $35 a month. The idea was that forcing drugmakers to disclose prices publically would potentially shame companies into lowering prices.
The change was scheduled to go into effect on Tuesday, and is one part of the Trump Administration’s blueprint for lowering rising drug prices that was unveiled last year.
The legal challenge to the rule was brought by Merck, Eli Lilly and Co., Amgen and the Association of National Advertisers.
HHS argued that the Social Security Act gave the organization the authority to adopt as part of its mandate to ensure effective administration of Medicare and Medicaid programs, which was being threatened by rising prescription drug prices.
In his opinion, Mehta said while federal agencies have wide latitude to formulate rules in their areas of administration, that authority is not unbounded.
“The court finds that HHS lacks the statutory authority under the Social Security Act to adopt the WAC Disclosure Rule. Neither the Act’s text, structure, nor context evince an intent by Congress to empower HHS to issue a rule that compels drug manufacturers to disclose list prices. The Rule is therefore invalid,” Mehta wrote.
Metha made no claims on the potential effectiveness of the rule itself, which he said “very well could be an effective tool in halting the rising cost of prescription drugs.”
The ruling is likely to be appealed by HHS to the United States Court of Appeals for the District of Columbia Circuit.
The pharma industry and some drug pricing experts have expressed concern about the rule saying that the disclosed prices did not accurately reflect the cost of the drugs to patients, potentially leading to consumer confusion and decreased medication use.
