D.C. Circuit Affirms Latham’s Whirlwind Win Invalidating Drug Price Disclosure Rule

Unanimous panel upholds Latham victory that went from filing a complaint to invalidation of a federal rule in 24 days.

June 17, 2020

Latham secured a major victory for three pharmaceutical company clients—Merck, Eli Lilly, and Amgen—in litigation about a federal rule that would have required the companies (and every other pharmaceutical manufacturer) to include their wholesale list prices when advertising their drugs on television. On June 16, 2020, a unanimous panel of the US Court of Appeals for the District of Columbia Circuit affirmed Latham’s successful challenge to the rule in an opinion that will likely be an important precedent for future litigation involving question of federal agencies’ statutory authority.

The case involved a rule promulgated by the Centers for Medicare & Medicaid Services within the Department of Health and Human Services (HHS). The Latham team had challenged the rule in the US District Court for the District of Columbia in June 2019 and leveled both a statutory and constitutional argument: (i) that the rule was beyond HHS’s statutory authority to adopt and (ii) that the compelled disclosure would be confusing and potentially misleading to patients, in violation of the First Amendment. The case went from filing to judgment in just 24 days. Just a day before the rule was slated to take effect, Latham prevailed on its statutory challenge when the District Court converted the motion for a stay of the rule’s effective date into a motion for judgment on the merits and invalidated the rule. HHS appealed the ruling, arguing that that the District Court’s analysis of HHS’s statutory authority was flawed. Latham briefed the appeal for the pharmaceutical companies and partner Rick Bress argued before the D.C. Circuit on January 13, 2020.

In an opinion that closely tracks Latham’s textual and statutory arguments, the D.C. Circuit affirmed, rejecting HHS’s arguments that the rule was a valid exercise of its statutory authority. The Court relied on the text of the statutory provisions HHS invoked, which authorize HHS to issue rules “necessary to the efficient administration of the functions with which [HHS] is charged,” 42 U.S.C. § 1302(a), and rules “necessary to carry out the administration of the insurance programs under” Medicare, 42 U.S.C. § 1395hh(a)(1). Latham had argued that HHS’s rule did not pass muster under the ordinary meaning of these provisions. After closely examining the statutory provisions and the rule itself, the Court found “no reasoned statutory basis for [the rule’s] far-flung reach and misaligned obligations,” and concluded that its “blunderbuss operation falls beyond any reasonable exercise of [HHS’s] statutorily assigned power.” In closing, the Court noted that while HHS’s “regulatory authority is broad,” it “may not “move the goalposts to wherever [it] kicks the ball.”

Along with Bress, Latham’s team on appeal included partners Daniel Meron and Michael Bern, counsel Sarah Gragert, associates Caroline Flynn, Gregory in den Berken, and Annie Wilson. The team also benefited immensely from a moot court panel consisting of partner Matthew Brill and associates Samir Deger-Sen, and Tyce Walters.

 
 
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