Merck & Co., Inc., et al. v. U.S. Department of Health and Human Services
Brief Summary: A group of pharmaceutical manufacturers sued the U.S. Department of Health and Human Services (HHS), challenging the agency’s rule that requires pharmaceutical manufacturers to disclose their list prices in direct-to-consumer advertisements.
Overview: On June 14, 2019, a group of pharmaceutical manufacturers filed a complaint with the United States District Court for the District of Columbia, challenging HHS’s final rule that requires pharmaceutical manufacturers to disclose their list prices in direct-to-consumer advertisements. The plaintiffs were Merck & Co., Inc.; Eli Lilly and Company; Amgen, Inc.; and the Association of National Advertisers, Inc. In challenging this rule, the plaintiffs argue that HHS’s rule is likely to confuse patients about the actual cost of their medications, which could increase the total cost of care. This is due to a product’s list price not reflecting wholesale price adjustments, including rebates and discounts, and not accounting for additional price reductions afforded by consumers’ insurance coverage.
In their complaint, the plaintiffs assert that the agency’s rule is invalid for two reasons. First, HHS lacks the statutory authority that would allow the agency to adopt a price disclosure mandate. Second, the agency’s rule violates the First Amendment of the United States Constitution because the government is compelling pharmaceutical manufacturers to make specific statements in direct-to-consumer advertisements.
Court Updates: United States District Court for the District of Columbia – Opinion, July 8, 2019
The court concluded that Congress has not explicitly granted HHS the authority to compel pharmaceutical manufacturers to disclose list prices in direct-to-consumer advertisements. Because HHS exceeded its authority to promulgate the price disclosure rule, the court prevented the rule from taking effect. The court’s holding did not reach the plaintiffs’ First Amendment argument.
Current Status: On August 22, 2019, the government appealed the district court’s decision to the U.S. Court of Appeals for the District of Columbia Circuit.
Impact: The court’s decision will determine whether HHS’s price disclosure rule will become effective. If the court rules in favor of the pharmaceutical manufacturers, direct-to-consumer advertisements will not be subject to the rule’s list price disclosure requirement.
The American Hospital Association, et al. v. Azar
Brief Summary: A group of hospitals sued the Centers for Medicare & Medicaid Services (CMS), challenging the agency’s hospital price transparency rule that was finalized on November 27, 2019.
Overview: On December 4, 2019, a group of hospitals filed a complaint with the United States District Court for the District of Columbia, challenging CMS’s final rule that requires hospitals to publish the rates they negotiate with private insurers. The plaintiffs argue that CMS lacks the statutory authority to promulgate the regulation. While CMS cites 42 U.S.C. § 300gg-18(e) to support the regulation, which requires hospitals to publish “standard charges for items and services provided by the hospital,” the plaintiffs argue that payer-specific negotiated charges are not “standard charges” because they reflect non-standard negotiated rates. The plaintiffs also argue that the rule violates the First Amendment of the U.S. Constitution because it compels speech without advancing a substantial government interest or being narrowly tailored to do so. Additionally, the plaintiffs argue that these negotiated rates are proprietary and requiring their disclosure would place a substantial burden on hospitals’ ability to negotiate with insurers. Finally, the plaintiffs argue that the rule violates the Administrative Procedure Act (APA) for being arbitrary and capricious.
Court Updates: The district court has not yet issued its opinion.
Current Status: The district court has not yet issued its opinion.
Impact: The court’s ruling will determine whether HHS’s hospital price disclosure rule will become effective. If the court rules in favor of the hospitals, they will not be required to disclose their negotiated rates to consumers.