A panel of federal appellate judges on Monday appeared unlikely to revive a Trump administration initiative to require drugmakers to disclose list prices in TV advertisements.
A decision against the rule would be a blow to President Donald Trump's drug-pricing agenda in an election year.
The key issue in the case before the U.S. Court of Appeals for the District of Columbia Circuit is whether HHS has the authority to require the price disclosures.
A Trump administration attorney argued that Congress implicitly gave HHS authority to require list price disclosure to ensure the "efficient administration" of Medicare and Medicaid. Ethan Davis of the U.S. Justice Department said that drug prices are a significant cost for the CMS, so lowering those costs would help the programs run more efficiently.
But three D.C. Circuit judges appeared to disagree during oral arguments. Congress did not explicitly mention regulating TV advertisements for prescription drugs in the law in question.
"I don't understand the connection between this rule and 'efficiently administered,' " Judge Harry Edwards said.
Davis said the rule isn't a control on drug prices. Instead, he relied on the general economic principle that markets operate more efficiently when there is more price transparency.
Judge Patricia Millett questioned whether the rule would truly lead to marketplace transparency, as most consumers do not pay the list price for drugs.
"Is there any economist that says that price transparency that is not the price people will pay improves efficiency in this sense?" Millett asked.
Medicare and Medicaid also do not pay the list prices for drugs. They instead pay other amounts that factor in rebates and discounts provided by drugmakers.
Richard Bress, a partner at Latham & Watkins who represented Merck & Co., Amgen, Eli Lilly and Co. and the Association of National Advertisers during oral arguments, said Congress requires drugmakers to provide a variety of mandatory discounts to have their drugs covered by Medicare and Medicaid, but did not mandate list price disclosure in direct-to-consumer advertisements.
"This is a case of 'agency action in search of a statutory home,' " the drugmakers wrote in their brief.
Even though the rule would only apply to drugs that Medicare and Medicaid pay for, the judges noted that it would apply to the vast majority of drugmakers. Medicare and Medicaid combined represent 40% of the U.S. drug market, according to CMS data, which means drugmakers have a huge incentive to comply with the CMS' demands to get their drugs covered by the public programs.
U.S. District Judge Amit Mehta found in July that the rule was outside of HHS' statutory authority. Several of the Trump administration's drug-pricing policies have been stymied by the courts, abandoned or delayed.