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The Trump administration suffered a blow when a federal judge blocked a key rule about drug price disclosures just hours before it was scheduled to take effect.

U.S. District Judge Amit P. Mehta in Washington, D.C., on Monday sided with a coalition of drug companies and blocked the Trump administration from implementing a policy that would require prescription drug manufacturers to disclose list prices in TV ads.

In May of 2019, the U.S. Department of Health and Human Services (“HHS”) published a final rule that regulates the marketing of prescription drugs. The rule requires drug manufacturers to disclose in any television advertisement the list price – also known as the wholesale acquisition cost – of a 30-day supply of the drug (“WAC Disclosure Rule”).

Merck & Co., Inc.; Eli Lilly and Company; and Amgen Inc.- and the National Association of Advertisers, Inc., a membership organization contend in a lawsuit they filed, that the WAC Disclosure Rule is unlawful. Plaintiffs advance two primary arguments.

First, they argue that the Rule exceeds HHS’s authority, because Congress neither expressly nor impliedly granted HHS the power under the Social Security Act to regulate drug marketing. Second, they maintain that the WAC Disclosure Rule is compelled speech that violates the First Amendment. Plaintiffs have asked the court to halt the WAC Disclosure Rule before it goes into effect.

The court found that HHS lacks the statutory authority under the Social Security Act to adopt the WAC Disclosure Rule. Neither the Act’s text, structure, nor context evince an intent by Congress to empower HHS to issue a rule that compels drug manufacturers to disclose list prices. The Rule is therefore invalid.

The court went on to conclude that “no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized. The responsibility rests with Congress to act in the first instance.”

It is not immediately clear how the administration will proceed, but the ruling threatens to rob President Trump of an important victory in the fight over drug costs.

Drug companies fought the rule from the start, arguing it would confuse consumers because a drug’s list price – which doesn’t reflect the discounts negotiated with insurers or through patient assistance programs – is often higher than what the patient actually pays.

Tricia Neuman, senior vice president of the Kaiser Family Foundation, said the administration and Congress are working on other drug pricing initiatives, but the decision is “certainly a setback for the administration.”

Neuman said drug pricing transparency “in and of itself is unlikely to have a huge impact on prices. There are a number of other proposals the administration and Congress are moving forward with that will have a more significant impact.”

But those initiatives, like tying what Medicare pays for drugs to what other countries charge, or even allowing Medicare to directly negotiate drug prices, are not close to being completed, and it’s not certain they will ever be finalized.

A drug industry lobbyist called the decision a “Pyrrhic victory,” because it would likely spur Congress to act.

“They won the battle and got the rule defeated, but now it’s likely going to be in legislation,” the lobbyist said, adding that it’s an easy bipartisan issue for lawmakers to support.

Bipartisan legislation introduced by Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Sen. Dick Durbin (D-Ill.) would codify the HHS regulation into law. The bill could be added to a legislative package that Grassley is trying to push through the committee.

A companion bill in the House is sponsored by Rep. Francis Rooney (R-Fla.).