Pharmaceutical companies win victory over Trump administration drug price transparency rule

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Alexander Gaffney Senior Manager, Health Research Institute, PwC US July 12, 2019

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A Trump administration regulation that would have required pharmaceutical companies to list the wholesale acquisition costs of their drugs in their TV advertising has been struck down by the US District Court of the District of Columbia, with a district court judge ruling in favor of an advertising trade group and several pharmaceutical companies that the regulation lacked a proper legal basis on which to stand.

Judge Amit Mehta wrote that while the court “does not question HHS’s motives in adopting” the transparency rule, it found that “it lacks the statutory authority under the Social Security Act to adopt” the rule as written.

Defendant HHS had argued the Social Security Act gave it the authority to administer the Medicare and Medicaid programs “efficiently,” and therefore authority enough to promulgate the rule. However, the law made no mention of television advertising or drug costs, and Mehta concluded that “[a]n agency’s general rulemaking authority plus statutory silence does not, however, equal congressional authorization.”

Plaintiffs—the Association of National Advertisers and several pharmaceutical companies—had also argued that the rule infringed upon their right to free speech by compelling them to include “list price” information that did not accurately reflect the true cost of a drug after potential discounts and a patient’s insurance was taken into account, but the court did not make a ruling on this aspect.

The final rule would have required companies to include information in television ads about the wholesale acquisition cost of the drug, also known as the “list price,” for a typical 30-day supply of the product or a full course of treatment. Those prices would have been required to be included in a standardized statement at the end of each ad.

The rule was declared invalid and will no longer take effect. The administration may appeal the order, and is still considering its options.

HRI impact analysis

The ruling is a short-term victory for the pharmaceutical industry, though it may cause some short-term issues for pharmaceutical companies. The final rule was set to come into effect on July 10, and most companies had likely reworked their television advertising to comply with the rule.

Many companies are now likely to rework those ads, either to remove any mention of cost entirely, or to comply with a set of guidelines set by the trade industry group PhRMA. However, the industry will face continued uncertainty. The Trump administration is likely to appeal the ruling or seek out other authorities with which to enact the rule, and Congress may take an interest in including authority to require price disclosures in advertising in any healthcare legislation it passes.

To read all of HRI’s coverage of the Trump administration’s efforts to control drug costs, please see our running coverage here.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Alexander Gaffney

Senior Manager, Health Research Institute, PwC US

Tel: +1 (202) 836 1604

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

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