(Reuters) – A U.S. appeals court on Tuesday upheld a ruling that struck down a Trump administration rule that required pharmaceutical companies to include the wholesale prices of their drugs in television advertisements.
The U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Merck & Co Inc, Eli Lilly and Co and Amgen Inc and said the U.S. Department of Health and Human Services (HHS) lacked authority to establish the rule.
“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,” U.S. Circuit Judge Patricia Millett wrote for the three-judge panel.
HHS did not immediately respond to a request for comment. The administration could either ask the full appellate court to rehear the case or ask the U.S. Supreme Court to take it up.
Alex Azar, HHS secretary, had announced the rule in May 2019, saying that forcing drugmakers to disclose their prices in direct-to-consumer TV advertising could help drive down drug costs if the companies were embarrassed by them.
HHS has said its power to establish regulations to administer Medicare and Medicaid gives it the authority to issue the rule to ensure Americans are aware of drugs’ prices, potentially reducing the $450 billion annually spent on drugs under the programs.
The drugmakers sued, arguing that disclosing so-called list prices would mislead consumers, who with insurance and discounts would never pay that price, into wrongly believing the amount they would have to pay for medications is higher than reality.
A federal judge in July 2019 struck the rule down. The appeals court said on Tuesday that HHS acted “unreasonably” in construing its regulatory authority in imposing the disclosure requirement related to drug pricing.
Reporting by Nate Raymond in Boston and Shivani Singh in Bengaluru; Editing by Saumyadeb Chakrabarty