Original article seen in Modern Healthcare, June 2019
Three drug companies sued the Trump administration over its mandate that they start disclosing their list prices in their ads.
The lawsuit, filed last week in the U.S. District Court in the District of Columbia, picks a fight with the top health officials even as the pharmaceutical industry is actively campaigning for the administration’s proposed ban on rebates for pharmacy benefit managers in Medicare Part D.
Merck & Co., Eli Lilly and Co. and Amgen sued along with the Association of National Advertisers, claiming that HHS (Health & Human Services) lacked the statutory authority to issue the regulation. Even if the agency could establish the rule, the drug makers claim it would violate the First Amendment’s freedom of speech protections.
Major pharmaceutical trade associations did not join the lawsuit.
The companies lead their complaint by saying the list price doesn’t represent what patients usually pay at the counter.
“That ‘list price’ is not, as patients will likely infer from the context, a suggested sales price for the retail transactions contemplated in advertisements,” the brief stated. “Rather, the rule requires manufacturers to use the gross price at which a prescription drug is offered to wholesalers, before rebates, discounts, or any other adjustments are applied. And the mandated price figure not only ignores such wholesale price adjustments, but also fails to account for the insurance coverage that a significant majority of Americans have for their retail purchases of prescription drugs.”
The companies went on to say the actual list price required by the rule “is often multiple times higher than the out-of-pocket cost” than is usually seen at point of sale.
They contended that disclosing the list price will “mislead” patients and that HHS is “actually counting on that misleading effect.”
“It posits that by forcing pharmaceutical manufacturers to advertise to patients ‘list prices’ that are many times higher than what most patients will actually pay, the (disclosure rule) will expos(e) overly costly drugs to public scrutiny,” the brief stated. “And more than that, HHS believes that ‘(t)his could discourage patients from using beneficial medications,’ which might reduce Medicare and Medicaid expenditures on pharmaceutical products but would be directly contrary to those patients’ best interests.”
The plaintiffs also defended direct-to-consumer advertisements as a way to educate the public about the kinds of treatments available.
“Such advertising alerts people who suffer from a given condition about new or existing treatment options of which they may not be aware,” the complaint said. “And even apart from awareness of a specific treatment, direct-to-consumer advertising can raise awareness about the health condition itself and prompt action, whether that be a conversation with a doctor or a positive lifestyle change.”
The lawsuit echoes the pharmaceutical industry’s core contentions in the ongoing drug-pricing debate. Drug makers have blamed players in the drug supply chain for their role in point-of-sale prices ever since the Trump administration unveiled its strategy in May 2018.
Meanwhile, the pharmaceutical industry is ramping up pressure on the administration over the Part D rebate rule, which the CMS has yet to release.
Rep. Mark Meadows (R-N.C.), who chairs the conservative House Freedom Caucus, and other lawmakers are circulating a letter to HHS Secretary Alex Azar for signatures. The lawmakers argue the proposed rule “will do more to lower list prices and patients’ out-of-pocket expenses than any other policy currently under consideration.”
“Many patients are struggling with their out-of-pocket expenses which have escalated, in part, because Part D plans do not use the rebates and discounts they receive from manufacturers to lower beneficiary costs at the point-of-sale,” the Meadows letter said. “As such, patients are paying cost-sharing based on artificially inflated list prices when they fill their prescriptions and do not feel the direct impact of the substantial price concessions provided by manufacturers to their Part D Medicare plans.”
Insurers and PBMs are running an equally intense campaign against that proposed rule, arguing that pharmaceutical manufacturers want the rebate rule in place to evade finger-pointing for their high prices.
