United States: More Confirming Than Surprising − CMS DTC Drug Pricing Diktat Fails In Court

Last Updated: July 16 2019
Article by James Beck

We'll get right to the point. In Merck & Co. v. United States Department of HHS, ___ F. Supp.3d ___, 2019 WL 2931591 (D.D.C. July 8, 2019), the court held that the direct-to-consumer pricing regulation proposed by the Centers for Medicare & Medicaid Services ("CMS") – on which we've commented here, and here – was an ultra vires exercise of nonexistent regulatory power. Here are the key rulings:

As to the existence of statutory authorization – nope. "The plain statutory text simply does not support the notion − at least not in a way that is textually self-evident − that Congress intended for the Secretary [of HHS] to possess the far-reaching power to regulate the marketing of prescription drugs." Id. at *7. "[T]he delegation of authority that HHS says allows it 'to speak with the force of law' on the marketing of prescription drugs is nowhere to be found in the vast statute that is the SSA [Social Security Act]." Id. at *8 (citation omitted).

As to general regulatory power being enough – nope, again. "An agency's general rulemaking authority plus statutory silence does not, however, equal congressional authorization." Id. "[T]he SSA's absence of an express limitation does not enable HHS to arrogate to itself the power to regulate drug marketing as a means of improving the efficiency of public health insurance programs." Id. "An agency cannot appropriate the power to regulate simply because Congress has not explicitly taken that power away." Id. at *9.

Because the court voided the regulation on administrative law grounds, it had no occasion to reach the First Amendment arguments that the drug company plaintiffs made (and we discussed in our prior ports).

Our initial post was entitled "The CMS DTC Drug Pricing Rule – FDA v. Brown & Williamson All Over Again?" – and indeed that was the case. The first case involving an "other statute" that the Merck court cited was, indeed, FDA v. B&W:

In Brown & Williamson, the Supreme Court instructed that when "determining whether Congress has specifically addressed the question at issue, a reviewing court should not confine itself to examining a particular statutory provision in isolation." 529 U.S. at 132. Other statutes may bear on Congress's intent. "[T]he meaning of one statute may be affected by other Acts, particularly where Congress has spoken subsequently and more specifically to the topic at hand." Id. at 133. That principle applies in this case.

Merck, 2019 WL 2931591, at *10. If anybody has (and we don't think so for the First Amendment reasons we discussed previously) the power to regulate prescription drug advertising in this way, it would be the FDA. "Congress also has enacted specific legislation pertaining to television advertising of drug products" in "21 U.S.C. § 353c." Id.

Congress deliberately and precisely legislated in the area of drug marketing under the FDCA. Such purposeful action demonstrates that Congress knows how to speak on that subject when it wants to. It is therefore telling that the SSA contains no provisions concerning drug marketing.

Id. at *11.

Also quoting B&W, "[c]ourts 'must be guided to a degree by common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency.'" Id. CMS was fifty years late to the party:

Common sense dictates that Congress would not have authorized such a dramatic seizure of regulatory power based solely on general rulemaking authority under the SSA. Further, it is not lost on the court that HHS has never before attempted to use the SSA to directly regulate the market for pharmaceuticals. . . . [W]hen, as here, an agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy, courts should greet its announcement with a measure of skepticism.

Id. (citations and quotation marks omitted).

[T]he agency's incursion into a brand-new regulatory environment, and the rationale for it, . . . make the Rule so consequential. To accept the agency's justification here would swing the doors wide open to any regulation, rule, or policy that might reasonably result in cost savings to the Medicare and Medicaid programs, unless expressly prohibited by Congress. Indeed, the agency identifies no limiting principle, aside from an express statutory withholding of authority.

Id. at *12. We always thought this was a lawless regulation, and now the first court to examine it has agreed. We think CMS knows it, too, and is cynically pursuing a doomed strategy more to be perceived as "doing something" about drug prices, than actually expecting to accomplish anything.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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