Merck, Lilly, Amgen Among Pharma Giants Suing U.S. Government Over New Drug Pricing Disclosure Rule

Recently, pharmaceutical giants such as Merck & Co., Eli Lilly and Company, and Amgen, in collaboration with the Association of National Advertisers, have filed a lawsuit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS).

Approximately five weeks ago, the U.S. Department of Health and Human Services (HHS) announced the adoption of a new rule requiring the disclosure of prescription drug prices in television advertisements. The regulation, initially proposed by President Trump a year ago, is scheduled to take effect on July 9. This development has served as the catalyst for the current lawsuit. Major pharmaceutical companies have uniformly denounced the rule as “unnecessary and illegal.”

In May 2018, while delivering a speech focused on lowering drug prices, President Trump proposed a drug pricing policy that would require pharmaceutical television advertisements to disclose drug prices. By October 2018, pharmaceutical industry lobbying groups had already called on major U.S. pharmaceutical companies to provide patients with information on the suggested list price and actual out-of-pocket costs for their products in television advertisements. They argued that this measure would help consumers more easily access drug pricing information and enhance transparency in drug pricing.

Relevant officials from the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) naturally expressed strong support for this initiative. On October 15, HHS issued a proposal requiring pharmaceutical manufacturers to include price information in television advertisements for any drug covered by Medicare or Medicaid if its monthly cost exceeds $35.

1. Key Issues in Dispute

But clearly, not all pharmaceutical giants are willing to disclose their most sensitive pricing information to the public.

Eli Lilly had previously expressed objections to this recommendation. During the 60-day public comment period following the publication of the proposal, Eli Lilly, together with Pfizer, Sanofi, and Johnson & Johnson, submitted a formal written comment arguing that the measure posed a potential risk of causing consumer confusion.

In this litigation, major pharmaceutical companies have strongly urged the rescission of the requirement to disclose drug prices in television advertisements, arguing that the Department of Health and Human Services (HHS) lacks the statutory authority to promulgate such a rule. These companies have even invoked the U.S. Constitution, asserting that “if HHS were to promulgate and enforce this rule, it would also violate the provisions of the First Amendment to the U.S. Constitution.”

Dan Jaffe, head of the Association of National Advertisers, stated in an interview with foreign media that while the government can certainly require pharmaceutical companies to disclose such information, these details may not be accurate for the millions of viewers receiving them. The new lawsuit also points out that the actual prices paid by consumers are often significantly lower than the list prices, and coverage varies across different types of insurance plans. In reality, consumers may not fully understand what the drug prices displayed in advertisements actually represent.

Amgen has also publicly stated its position. Amgen believes that consumers need clear information to understand the costs they are paying for medications, but this does not mean the company supports the current regulations. “The rule not only raises serious free speech concerns, but also requires list prices that fail to account for differences in insurance coverage, treatment regimens, and individual patient circumstances.”

When the Trump administration first proposed the policy, the Pharmaceutical Research and Manufacturers of America (PhRMA) clearly stated in a press release that displaying drug prices in television advertisements would not inform consumers of their actual out-of-pocket costs. The list price shown in advertisements is neither the amount actually paid by insurers nor the actual out-of-pocket cost borne by consumers at pharmacies.

2. Trump Takes a Hard Line on U.S. Drug Prices

This is not the first time pharmaceutical giants have pushed back against new U.S. government regulations aimed at curbing drug prices. Since Donald Trump took office, there have been successive rounds of tit-for-tat maneuvers between pharmaceutical companies and the government.

Controlling high drug prices is a challenging issue recognized by countries worldwide, and the United States, as the largest pharmaceutical market globally, is no exception. Due to differences in systems and policies, the U.S. government struggles to implement unified nationwide price controls, limiting the effectiveness of administrative measures in reducing drug prices. Previously, it was common practice for U.S. pharmaceutical companies to raise prices twice a year, at the beginning and middle of the year. However, facing increasingly strong administrative pressure, many large U.S. pharmaceutical firms now increase prices only once annually, in January.

During his 2017 presidential campaign, lowering drug prices was one of Trump’s key strategies to win public support, and he has consistently claimed since then that reducing prescription drug prices would be a “top priority.”

To address the issue of high drug prices, in May 2018, the Trump administration launched the "American Patients First" plan. Specific measures included more aggressive drug price negotiations, stimulating market competition between generic and brand-name drugs, cracking down on markups in the distribution chain by strengthening market regulation, and promoting transparency in healthcare service pricing to pressure drug prices downward.

3. The Counterattack and Struggle for Survival of the Giants

Even though Trump launched a series of proactive attacks on drug prices in 2018, pharmaceutical companies did not sit idly by.

Two months after Trump announced “America’s Patients First,” on July 1, 2018, pharmaceutical giant Pfizer raised the prices of 100 drugs by more than 10%, an act seen as “the first to voice opposition.”

On July 9, an infuriated Trump lashed out on Twitter: “Pfizer and other pharmaceutical companies should be ashamed of their unjustified price hikes! ... We will respond!” On the day he publicly called them out, Pfizer’s stock price declined.

The plot quickly took a turn. The following day, after President Trump held talks with HHS Secretary Alex Azar and Pfizer CEO Albert Bourla, Pfizer decided to postpone its drug price increases, with the delay not exceeding six months. Subsequently, many other pharmaceutical companies, including Bayer, Novartis, AstraZeneca, and Amgen, followed suit.

In late 2018, foreign media reported that more than 30 pharmaceutical companies, including Novartis, Bayer, Allergan, AstraZeneca, and Biogen, would raise drug prices in the U.S. market starting January 2019. Previously, in early November, statistics showed that 28 pharmaceutical companies had already submitted price increase notifications to California state government agencies.

This February, Trump strongly criticized high drug prices in a public speech. He urged Congress to pass legislation to address the issue of high drug prices and stated that it was "completely unacceptable" for the same medication to be priced higher in the U.S. market than in other countries.

In response to the Trump administration’s mandate requiring the disclosure of drug prices in television advertisements, Johnson & Johnson became the first company to comply with the policy in late March 2019. The company added the list price of $448 for its anticoagulant Xarelto, along with out-of-pocket cost information, to the end of its commercial spots, and also included a website URL providing details on insurance coverage for the medication.

Eli Lilly, one of the key plaintiffs in recent lawsuits, has also responded appropriately. Reports indicate that since January 2019, Eli Lilly has included information about its drug pricing website in television advertisements for its diabetes medication Trulicity and its migraine medication Emgality.

Judging from the current situation, an increasing number of pharmaceutical giants will challenge the Trump administration on drug pricing.

Original Title: Global Pharma Giants Fight Back for Survival! Merck, Eli Lilly, Amgen, and Others Collectively “Push Back” Against the U.S. Government—All Because of This?