October 30, 2019
VICTORY! Court declared the price rule illegal.
In the summer of 2019, the Trump administration passed a rule requiring drugmakers to state the prices of their medicines in their direct-to-consumer advertisements. The idea is that greater transparency will help inform patients and will encourage competition that will lower prices.
The problem is that the rule doesn’t actually require that. In fact, it requires drugmakers to state not the actual prices of their products, but the “wholesale acquisition price” of a “typical 30-day regimen” of a medicine—which are terms that don’t have clear definitions. Patients don’t pay a “wholesale acquisition price”—they pay a sales price, which is entirely different, because it includes all sorts of discounts, rebates, and other price-reductions. A “wholesale acquisition price” isn’t a sales price, or anything like it—it’s a number that drugmakers specify at the beginning of the complicated negotiation process that leads to the determination of a drug price. It’s like a price tag, except that nobody actually pays that price. Worse, the rule defines “wholesale acquisition price” in a way that contradicts the definition courts have used. The courts have defined the term as meaning a price that does include all the discounts and rebates—whereas the rule defines it as meaning a price without all the discounts and rebates.
Research shows that if you tell patients these misleading numbers, many of them will not even bother asking their doctors about medicines that they don’t think they can afford. That’s not good for them. Simply put: It’s a bad idea to force companies to tell people untrue things about their products.
It’s not just a bad idea; it’s also unconstitutional. The First Amendment does not allow the government to force companies to say things about their products that are not true. Under the so-called Zauderer Rule, the government can force businesses to say truthful and non-controversial things about their products, but nothing more. Yet the “wholesale acquisition price” of a drug is simply not the true price of that drug, or anything even close to it.
After filing a comment opposing the adoption of the rule, we filed this friend-of-the-court brief urging the D.C. Circuit Court of Appeals to find the rule unconstitutional under the First Amendment.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation and holds the Duncan Chair in Constitutional Government. He litigates important cases for economic liberty, private property rights, free speech, and other matters in states across the country. Timothy is the author of several books, including Frederick… Read more...
Jon Riches is the Vice President for Litigation for the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation and General Counsel for the Institute. He litigates in federal and state trial and appellate courts in the areas of economic liberty, regulatory reform, free speech, taxpayer protections, public labor issues, government transparency, and school choice, among others.… Read more...
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