On Tuesday June 16th, the U.S. Court of Appeals for the District of Columbia Circuit upheld a District Court decision that invalidated a Department of Health and Human Services (“HHS”) rule requiring pharmaceutical companies to include the wholesale prices of their drugs in direct to consumer TV advertising.  See Regulation to Require Drug Pricing Transparency, 84 Fed. Reg. 20732 (May 10, 2019) (the “Disclosure Rule”).  Ruling in favor of Merck & Co., Inc., Eli Lilly and Company and Amgen, Inc., the Appeals Court held that HHS lacked statutory authority to establish the Disclosure Rule.

The Court found that HHS “acted unreasonably in construing its authority to include the imposition of a sweeping disclosure requirement that is largely untethered to the actual administration of the Medicare or Medicaid programs.  Because there is no reasoned statutory basis for its far-flung reach and misaligned obligations, the disclosure rule is invalid and is hereby set aside.”

Pharmaceutical manufacturers will be relieved by Tuesday’s ruling, which provides clarity for the content of their DTC advertisements.  However, due to the long timelines and significant expense involved in planning, developing and broadcasting DTC advertisements, some manufacturers had already begun disclosing wholesale acquisition costs of their drugs following publication of the Disclosure Rule.  Notwithstanding Tuesday’s ruling, those companies that have implemented drug price disclosure policies for their DTC advertisements are likely to continue their disclosure practices.  With some companies voluntarily disclosing prices in DTC advertising, consumer expectation may necessitate that all companies eventually follow suit.  Accordingly, in addition to creating consistent policies for pricing disclosure in line with industry peers, pharmaceutical manufacturers will continue to contend with challenges of describing the nexus between a drug’s wholesale acquisition cost and the price actually paid by patients in consumer friendly language.

Furthermore, federal and state regulators’ desire to halt rising drug prices remains. Numerous states have enacted drug pricing transparency laws and regulations, requiring the creation of increasingly complex pricing disclosure compliance operations.  In sum, despite Tuesday’s ruling, pharmaceutical manufacturers can expect continued scrutiny on drug pricing and increasing mandates for pricing transparency.