Civil Litigation,
Health Care & Hospital Law
Dec. 30, 2020
Judge blocks nationwide US policy to lower drug prices
Rejecting claims that there’s an urgent need to slash drug costs amid the COVID-19 pandemic, U.S. District Judge Vince Chhabria in San Francisco ruled the U.S. government improperly used the crisis as a guise to exceed its authority in setting regulatory policy.
A federal judge in San Francisco blocked implementation of a U.S. government policy that would have lowered drug prices because he found it violates procedural requirements for enacting new rules.
Rejecting claims that there's an urgent need to slash drug costs amid the COVID-19 pandemic, U.S. District Judge Vince Chhabria ruled Monday the U.S. government improperly used the crisis as a guise to exceed its authority in setting regulatory policy.
"In fact, it seems obvious -- based on both common sense and the way the interim final rule is written -- that the reasons the government offers for dispensing with the notice and comment requirements are contrived," he wrote. "The real reason is that the current presidential administration is in its waning days and would not have time to enact the policy if it adhered to these requirements."
The Department of Health and Human Services did not immediately respond to requests for comment. Biotechnology Innovation Organization v. Azar, 20-cv-08603 (N.D. Cal., filed Dec. 4, 2020).
The "most favored nations" policy, which was unveiled in November and was set to go into effect in January, alters the method for determining reimbursement payments that health care providers receive for administering the most commonly used 50 prescriptions to Medicare patients. It sets what the government pays for the drugs to the lowest prices paid in comparable countries, such as Canada, Denmark and Japan.
Biotechnology Innovation Organization, which was the lead plaintiff in the case, said in a statement that the nationwide injunction enjoins "the president's reckless scheme of foreign price controls on the very scientists working to end our current pandemic."
"Arbitrary government price setting creates unnecessary barriers for scientists and researchers ushering in the next generation of lifesaving cures, destroys the next generation of medical innovation, and eliminates hope for Americans desperately waiting for cures and treatments," the organization's president Michelle McMurry-Heath said in the statement.
Biotechnology trade associations and advocacy groups sued in December to block implementation of the rule, claiming the government violated notice-and-comment requirements under the Administrative Procedure Act. They argued the policy might lower access to drugs, lead to some Medicare patients receiving inferior medications and deprive biotechnology companies of funding to finance research and development.
The Department of Health and Human Services countered that it could forgo procedural hurdles to provide emergency relief in response to economic disruptions caused by the pandemic. It noted that some Medicare patients are skipping doses of their medication or entirely abandoning treatment, citing unemployment rates that are nearly twice pre-pandemic levels and straining budgets among beneficiaries.
Chhabria called the government's argument that it was exempted from notice and comment requirements "flimsy" and said plaintiffs are "very likely -- indeed virtually certain -- to prevail" on their claims.
"Executive branch officials may not circumvent clear legal requirements in the Eleventh Hour to achieve goals they couldn't accomplish in the normal course," he wrote.
There have been legislative proposals to tie Medicare reimbursement rates to foreign drug prices since 2018, but Congress has not adopted them.
Ruling that the public interest would be harmed by implementing the rule in January, Chhabria agreed with plaintiffs that the policy could cause extreme hardship to health care providers due to the financial disruption caused by the foreign-price-based reimbursements.
Biotechnology companies that create the drugs will also be injured since they will have to decide whether to slash prices or lose market share, the judge found.
The use of nationwide injunctions has come under scrutiny by the Department of Justice and federal appeals courts. They have argued that federal judges have increasingly opted to issue such orders, blocking government policies while they work their way through the courts.
There have been 55 nationwide injunctions against policies implemented by President Donald Trump's administration, compared to 31 against the previous two administrations, according to the Justice Department in February.
Winston Cho
winston_cho@dailyjournal.com
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