Judge Reverses Trump Rule Mandating Drug Ad Price Disclosures

In a victory for drug companies and marketers, a federal district judge has vacated a Trump Administration rule that drug manufacturers have to disclose their list prices in direct-to-consumer (DTC) TV, radio and online drug ads.

Drug companies had argued that the mandate would cause confusion, exceeded the Administration's authority, and was unconstitutional.

In May, the Department of Health and Human Services (HHS) as part of the Administration's effort to lower drug prices, said that drug companies had to "disclose the list price to patients for prescription drugs and biological products in their TV (broadcast, cable and satellite) and online ads."

Related: WLF Says Trump Administration Can't Force Drug Companies to List Prices

In his ruling Monday (July 8), Judge Amit P. Mehta said that the court was not questioning the motives behind the effort, or the wisdom of doing so.

"[The] 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," he wrote.

"The court finds that HHS lacks the statutory authority under the Social Security Act to
adopt the 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. In view of this holding, the court does not reach Plaintiffs’ First Amendment challenge."

Courts generally avoid weighing into First Amendment arguments if a decision can be reached on narrower grounds, i.e., without getting into the thicket of constitutionality.

HHS had acknowledged that Congress had not explicitly provided it with the authority to compel drug price disclosures in ads, but also said there was a "clear nexus" between that disclosure and the Social Security Act's requirement that Medicaid and Medicare be run efficiently.

It said that while the drug industry had to disclose the "major side effects" a drug can have on a user's health, it is not required to disclose the impact it can have on wallets and purses. That is changing as a way to try and lower drug prices," it said.

No it isn't, said Mehta, at least not with this legal underpinning. He suggested that allowing such authority could open the door to other healthcare changes Congress did not expressly authorize.

"To be sure, the costs imposed by the Disclosure Rule amount to a rounding error for
the pharmaceutical industry," he wrote. "But that argument misses the point. It is the agency’s incursion into a brand-new regulatory environment, and the rationale for it, that make the Rule so consequential.

"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. Indeed, the agency identifies no limiting principle, aside from an express statutory withholding of authority. So, this case is not just about whether HHS can force drug companies to disclose their list prices in the name of lowering costs. Rather, the WAC Disclosure Rule represents a significant shift in HHS’s ability to regulate the health care marketplace."

At about the same time the Trump Administration announced its blueprint for lowering prices, Pharmaceutical Research and Manufacturers of America (PhRMA) looked to head off that effort, announcing that their members would be providing "more transparency" about the costs of their medicines in DTC ads, including "direct[ing] patients to information about medicine costs," including the list price as well as "available financial assistance."

But the key to that is the "directing patients" part, since PhRMA suggests that could be to a Web site where the information would be, rather than in the body of the ad.

“Our member companies are taking a new approach to how they communicate about medicines in DTC television advertisements to make it easier for patients to access information about medicine costs,” said PhRMA president Stephen J. Ubl. “The Administration and Congress have called on our industry to provide cost information in DTC advertisements, and our members are voluntarily stepping up to the plate.” But PhRMA suggested the Web site approach was better than putting the actual prices in the ads.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.