As promised, the Department of Health and Human Services (HHS) filed a brief in the United States Court of Appeals for the District of Columbia Circuit challenging the district court’s holding that the Secretary lacked the authority to compel drug manufacturers from disclosing drug prices in direct-to-consumers television advertisements (DTC rule). For additional background, check out our prior posts: here, here, and here. On September 23, 2019, HHS filed its appeal in the D.C. Circuit against plaintiffs Merck & Co., Eli Lilly and Co., and Amgen Inc. The brief argues that the district court erred in holding that HHS lacks the statutory authority through the Social Security Act (SSA) to force the DTC rule upon drug manufacturers because they are not direct participants in the Medicare and Medicaid programs.

The opening brief maintains that HHS has statutory authority to promulgate the DTC rule through 42 U.S.C. § 1395hh(a)(1) of the SSA, which provides, “[t]he Secretary shall prescribe such regulations as may be necessary to carry out the administration of the insurance programs.”

The appeal stresses that the district court incorrectly assumed that the Food, Drug, and Cosmetic Act (FDCA) limits the authority of HHS in the area of drug price advertising. While the Food and Drug Administration (FDA) has authority over drug manufacturers in terms of advertisements for pharmaceuticals, HHS points out that authority relates to safety and efficacy disclosure and does not prohibit the Centers for Medicare & Medicaid Services (CMS) from requiring different disclosures to advance different goals. Instead, HHS argues that just because Congress “deliberately and precisely legislated in the area of drug marketing under the FDCA” giving FDA authority over drug advertisements, Congress did not implicitly disallow HHS from regulating marketing of drugs under a different authority, namely the DTC rule.

According to the brief, the district court erred in concluding that advertising by drug manufacturers to Medicare and Medicaid beneficiaries is beyond HHS’s scope of rulemaking authority because they do not receive payment for their products from CMS, nor are they direct participants. HHS rebuts the district court’s holding by explaining that “efficient administration” of the Medicare and Medicaid programs extends to drug manufacturers who supply drugs to Medicare and Medicaid enrollees. To support its position, HHS asserts that it has broad rulemaking authority, including the oversight of drug manufacturers when they enter into Medicaid Drug Rebate Program agreements as well as Medicare Coverage Gap Discount Program agreements.

Of note, the brief explains that the DTC rule would “improve the efficient administration of the Medicare and Medicaid programs by improving drug price transparency and informing consumer decision-making, both of which can increase price competition and slow the growth of federal spending on prescription drugs.” Without the DTC rule, HHS warns that the “unprecedented rise in prescription drug costs pose a grave threat to Medicare and Medicaid.” According to the appeal, the DTC rule would protect those programs’ fiscal viability and increase transparency.

It is too soon to tell how this case will play out in court, but we will continue to track the progress of this appeal, so stay tuned.

The D.C. Circuit case is Merck & Co. Inc. et al. v. U.S. Department of Health and Human Services et al., case number 19-5222.