Jan. 20, 2020 — A three-judge panel in the U.S. Court of Appeals for the District of Columbia sounded skeptical of the Trump administration’s position when it heard oral arguments last week in the government’s appeal of a U.S. District Court judge’s decision that struck down a Centers for Medicare & Medicaid Services (CMS) rule mandating that list prices be included in televised direct-to-consumer (DTC) advertising of prescription drugs.

The federal appellate panel heard the appeal of U.S. District Judge Amit P. Mehta’s July 2019 decision; Mehta struck down the rule, stating that CMS did not have statutory authority to require that the wholesale acquisition cost (WAC), essentially the list price, be included in TV ads. Because he found that Congress had not given CMS authority to issue such a rule, Mehta did not address the First Amendment issues of “compelled speech” raised in the case, nor did he speak to the practical issues in requiring a price metric that does not reflect what typical patients pay for a prescription drug.

At the Jan. 13 hearing, the Trump administration argued that it is tasked by statute with the “efficient administration” of Medicare and Medicaid, and that these services are more efficient when consumers can shop around for drugs. Attorneys for three drug makers (Merck, Eli Lilly, and Amgen) and the Association of National Advertisers, which brought the lawsuit, countered that the government was overstepping its constitutional authority. The questioning suggested the appellate judges were not convinced by the government’s argument for authority, and at least one judge indicated that Congress gave the FDA, not the CMS, authority to regulate drug advertising.

Further, the judges’ questions indicated they are not convinced this regulation would help control drug costs, on the basis that patients rarely pay the list price and thus the list price is not meaningful to them.

The tone of the questions suggests the Court of Appeals is likely to let the lower court decision stand. If so, the administration could appeal the case to the U.S. Supreme Court. There remains an effort in Congress, spearheaded by Senators Chuck Grassley (R.-Iowa) and Dick Durbin (D-Ill.), to pass legislation to require list prices in DTC ads, thus avoiding the jurisdictional question.