Trump officials seek plan B on drug pricing rule

The Trump administration suffered a blow when a federal judge blocked a key rule about drug price disclosures just hours before it was scheduled to take effect.

U.S. District Judge Amit P. Mehta in Washington, D.C., on Monday sided with a coalition of drug companies and blocked the Trump administration from implementing a policy that would require prescription drug manufacturers to disclose list prices in TV ads.

Experts don’t believe the rule would have been very effective at lowering drug prices, but it was one of President Trump’s highest-profile initiatives and the first policy released after the administration unveiled its drug pricing “blueprint” in 2018.{mosads}

Mehta said the Department of Health and Human Services (HHS) does not have the authority to compel drug companies to disclose prices.

“No matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized. The responsibility rests with Congress to act in the first instance,” Mehta wrote.

It is not immediately clear how the administration will proceed, but the ruling threatens to rob Trump of an important victory in the fight over drug costs.

Trump has made lowering drug prices a top priority of his presidency, and the decision leaves him with few drug pricing accomplishments to point to heading into the 2020 election.

After the ruling was announced, the White House was quick to slam Mehta.

“It is outrageous that an Obama-appointed judge sided with big pharma to keep high drug prices secret from the American people, leaving patients and families as the real victims,” White House spokesman Judd Deere said Monday.

The pharmaceutical companies who brought the case — Amgen, Merck and Eli Lilly — were joined in the lawsuit by the Association of National Advertisers (ANA). The rule was scheduled to take effect Tuesday.

Under the rule, which was announced by HHS Secretary Alex Azar in May, drug manufacturers in TV commercials would 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.

Azar argued that forcing drugmakers to disclose their prices in direct-to-consumer TV advertising could shame companies into lowering their prices. In announcing the rule, 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 in May when the administration announced the final rule.

Mehta did not weigh in on the agency’s reasoning for trying to implement the policy and said it doesn’t matter if the policy was going to be effective.

“To be sure, the costs imposed by the … Rule amount to a rounding error for the pharmaceutical industry,” Mehta 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.”

Drug companies fought the rule from the start, arguing it would confuse consumers because a drug’s list price — which doesn’t reflect the discounts negotiated with insurers or through patient assistance programs — is often higher than what the patient actually pays.

Tricia Neuman, senior vice president of the Kaiser Family Foundation, said the administration and Congress are working on other drug pricing initiatives but said the decision is “certainly a setback for the administration.”

Neuman said drug pricing transparency “in and of itself is unlikely to have a huge impact on prices. There are a number of other proposals the administration and Congress are moving forward with that will have a more significant impact.”

But those initiatives, such as tying what Medicare pays for drugs to what other countries charge or even allowing Medicare to directly negotiate drug prices, are not close to being completed, and it’s not certain they will ever be finalized.

A drug industry lobbyist called the decision a “Pyrrhic victory” because it would likely spur Congress to act.

“They won the battle and got the rule defeated, but now it’s likely going to be in legislation,” the lobbyist said, adding that it’s an easy bipartisan issue for lawmakers to support.

Bipartisan legislation introduced by Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Sen. Dick Durbin (D-Ill.) would codify the HHS regulation into law. The bill could be added to a legislative package that Grassley is trying to push through the committee.

A companion bill in the House is sponsored by Rep. Francis Rooney (R-Fla.).

Ian Spatz, a senior adviser at Manatt Health who represents industry clients, also said he thinks the administration will look to Congress.

“The idea was politically popular and easy to understand and was seen by many as a step in the right direction,” Spatz said, explaining why he believes Congress would want to act.

Spatz said if Congress passes price disclosure as a law, the drug companies may still challenge it on First Amendment grounds.

The fight shows no signs of ending.

Dan Jaffe, ANA’s executive vice president for government relations, said the group is prepared to fight any future efforts to regulate advertising speech.

“You just can’t force people to state things that are false that would be harmful to them,” Jaffe said.