Appeals court skeptical of Trump rule on TV drug ads

Drugmakers and the administration headed to court Monday in a fight over a Trump rule that would require companies to disclose the list prices of their drugs in television advertising. 

Three drug companies — Merck, Eli Lily and Amgen — argue the rule, which was blocked by a federal court in July, is outside the authority of the Department of Health and Human Services (HHS).

The Trump administration urged a federal appeals court Monday to overturn that ruling, arguing it has the authority under the law to run the Medicare and Medicaid programs efficiently. The health care programs for the elderly and the poor paid about $240 billion for prescription drugs in 2016.

But the three-judge panel of the U.S. Court of Appeals for the D.C. Circuit sounded skeptical in its grilling of government lawyers, questioning the agency’s authority to issue the rule and whether the disclosure of list prices, which are often higher than what patients end up paying, would be helpful to consumers. 

“The problem is the cost of prescription drugs. I don’t see this as a solution to the problem,” said Judge Karen LeCraft Henderson, an appointee of former President George H.W. Bush. 

The list price “is not the price I’ll ever pay. Why is that not adding confusion?” 

The other two judges who heard arguments on Monday are Patricia Millett, an Obama appointee, and Harry T. Edwards, a Carter appointee.

The case represents another high-stakes test for President Trump’s drug pricing agenda, which mostly relies on administrative action and rulemaking. 

While lowering drug prices has been a top initiative for the president, most of his plans have had trouble getting off the ground. 

The administration has conceded in the past that it needs more authority from Congress to act on drug prices, but an agreement between the Democratic House and Republican Senate has proven difficult. 

The advertising rule, which would only apply to drugs that cost at least $35 a month and are covered by Medicaid and Medicare, would force drug companies to compete and encourage patients to shop for better deals, potentially driving down prices, said Ethan Davis, a Justice Department attorney representing HHS in its case. 

A drug’s list price is not usually public information. 

“This lack of transparency threatens Medicare and Medicaid’s sustainability and comes at the expense of American taxpayers,” the government wrote in its brief. 

But the judges questioned those claims, noting that Congress has not passed a specific law directing HHS to require drug companies to disclose prices in advertising. 

They also worried the ads could cause confusion because the list price, which is set by drug manufacturers, often isn’t what patients actually pay for their drugs after insurance is taken into account. 

That was the argument made by drug companies, with the attorney representing them, Richard Bress, telling the court Monday the rule could be “far more dangerous than helpful” if it takes effect. 

Patients that view a list price as too high might stay away from it, even if it could help their condition, drug companies argue.  

Davis, of the Justice Department, agreed.

“Consumers lose interest in higher-priced drugs,” he said. But he added that should give companies incentive to lower their list prices. 

The administration also argued the list price has a relationship to what patients end up paying; drugs with a higher list price could also have a higher copay or coinsurance, Davis said.

“It doesn’t tell you what you’ll actually pay … but gives you a good idea of whether you’ll pay more or less,” Davis said. 

Still, HHS and the Justice Department face a high hurdle in getting the appeals court to overturn the ruling issued by U.S. District Judge Amit Mehta, an Obama appointee, in July. 

Mehta wrote in his ruling that HHS’s authority to issue rules is not “unbounded.” 

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

The rule is also opposed by broadcasting and advertising groups. The drug industry spends billions on television ads each year, with prescription drugs accounting for a high percentage of it.

The rule, though, has support on Capitol Hill among lawmakers from both parties. Sens. Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) have sponsored a bill that would require price disclosures in drug advertisements, but the path forward for their legislation is uncertain. 

Durbin has asked for unanimous consent to pass the bill, meaning it would not require a roll call vote, but it has been objected to by some Republicans. 

Lawmakers are also pushing other measures on drug prices.

A bill sponsored by Grassley and Sen. Ron Wyden (D-Ore.) would cap the price increases drug companies typically make every year. That bill is supported by Trump but opposed by Senate Republicans. 

Meanwhile, the administration is preparing to finalize a rule that would allow some states to import cheaper prescription drugs from Canada. 

The rule is fiercely opposed by the drug industry and is likely to also face legal action.