The pharmaceutical and advertising industries are taking their fight with the Trump administration over drug price disclosures to court.
Three drug companies — Amgen, Merck and Eli Lilly — and the nation’s largest advertising group last week announced they were suing the Trump administration over its new policy of requiring prescription drug manufacturers to disclose list prices in TV ads.
The plaintiffs argue that the rule violates their First Amendment rights, and the lawsuit seeks to overturn the administration’s latest effort to bring transparency to the medication pricing system.
The rule is set to take effect July 9, and the industry groups are asking for it to be put on hold before that time.
A win for the drug industry would be a setback for the Department of Health and Human Services (HHS) and could rob President TrumpDonald TrumpGraham says he hopes that Trump runs again Trump says Stacey Abrams 'might be better than existing governor' Kemp Executive privilege fight poses hurdles for Trump MORE of an important accomplishment in the fight over drug prices. The rule is one of Trump’s most high-profile initiatives on drug pricing, which he has said is a priority for his administration.
An industry loss, meanwhile, could lay bare some unsavory pricing practices.
Trump has made lowering drug prices a top priority for the administration. But even if the rule survives the legal challenge, questions remain over how effective it will be at actually lowering drug prices.
Nicholas Bagley, a law professor at the University of Michigan, said the lawsuit wasn’t surprising but that the final rule is not the biggest threat to the drug industry right now.
“In the list of nasty things you can do to drug companies, this doesn’t make the cut,” Bagley said. “It goes to the fecklessness of the [rule] to begin with. It’s not designed to drive down drug spending, it’s made to give the impression that the Trump administration cares about drug spending.”
Under the new policy, which was announced by HHS Secretary Alex Azar last month, drug manufacturers will have to state the list price of a 30-day supply of any drug that is covered through Medicare and Medicaid and costs at least $35 a month.
According to HHS, the idea behind the rule is to make patients better informed so they can talk about the affordability of medicines with their doctors. At the time, Azar said there’s no reason patients should be kept in the dark about the full prices of the products they’re being sold.
“Patients have a right to know, and if you’re ashamed of your drug prices, change your drug prices. It’s that simple,” Azar said last month when the administration announced the final rule.
The drug and advertising industries have been foreshadowing the lawsuit ever since the rule was first proposed. Drugmakers questioned the federal government’s legal standing for requiring the price disclosures.
Drug companies also argued that list prices don’t reflect what patients actually pay for the drug, because those figures don’t reflect the discounts negotiated between insurers and middlemen, or patient assistance programs.
PhRMA, the nation’s top drug lobby, wants its members to disclose pricing on separate websites.
One major drug maker, Johnson & Johnson, though, has aired commercials for a blood thinner, Xarelto, that discloses the list price.
The Association of National Advertisers (ANA), which is joining with the drug companies in the lawsuit, filed comments on the proposed rule arguing that forcing pricing disclosures in TV ads is likely to mislead consumers and could violate First Amendment protections.
Their lawsuit includes similar language. The final rule will mislead patients “about their out-of-pocket costs for prescription drugs in a manner that even HHS admits may ‘confuse’ and ‘intimidate’ patients,” the ANA complaint said.
Ian Spatz, a senior adviser at Manatt Health who represents industry clients, said he thinks the lawsuit will be a test of the administration’s regulatory authority.
He predicted the lawsuit would be upheld, but not because of any constitutional arguments.
“I believe that the courts won’t even get to the important First Amendment questions but will instead agree with the plaintiffs that [the Centers for Medicare and Medicaid Services] lacks the authority to regulate this advertising,” Spatz said. “This regulation is simply a bad idea that is politically attractive.”
HHS has said they think the rule is on firm legal ground, and Azar said there’s no reason patients should be kept in the dark about the full prices of the products they’re being sold.
First Amendment arguments have succeeded against government health care rules in the past, most notably in 2012 when the D.C. Circuit Court of Appeals struck down a Food and Drug Administration rule requiring graphic images posted as warnings on cigarette packs on constitutional grounds.
Beyond First Amendment concerns, the drug industry has an interest in protecting its reputation.
It’s not clear if patients will steer clear from certain drugs if TV ads show high list prices, but Bagley said some in the industry need to show they won’t go down without a fight.
The drug industry spends as much as $6 billion on television ads a year, and advertising on television accounted for 73 percent of all ad spending on prescription drugs.
With the 2020 elections looming and the drug industry already withering attacks from Trump and Democrats, new attention on the companies’ prices could be a public relations nightmare.
Prescription drug list prices are “eye-poppingly large figures,” Bagley said.
“So, you may worry ... industry’s reputation will take a further hit because of these eye-popping prices,” Bagley said.
“There’s a desire to make it clear they are armed for bear when it comes to any legislative or regulatory [changes].”