Pharma Organizations Sue HHS Over Most Favored Nation Drug Rule

UPDATE 12/23/2020: Judge Blake of the US District Court for the District of Maryland has granted a temporary restraining order on the Most Favored Nation rule.

Top pharmaceutical organizations recently filed a lawsuit challenging HHS’ Most Favored Nation (MFN) Interim Final Rule. 

Pharmaceutical Research and Manufacturers of American (PhRMA), Association of Community Cancer Centers (ACCC), Global Colon Cancer Association (GCAA), and National Infusion Center Association (NICA) challenged the legality of the rule, contending that it exceeds statutory authority provided to CMS, raises “serious” constitutional questions, and fails to follow required rulemaking procedures.

The organizations are seeking a permanent ruling against the enforcement of the MFN Rule, including a temporary restraining order, a declaration that the MFN Rule is unconstitutional and invalid, and other appropriate relief. 

The organizations also claim that CMS did not permit the public to have any say in the new rule and discarded any input generally required for rulemaking.

Instead, CMS issued MFN as an “interim final rule,” effective immediately.

“The Most Favored Nation Interim Final Rule is bad policy that is contrary to law and that the administration expressly admits will disrupt patients’ access to medicines,” James C. Stansel, PhRMA’s executive vice president and general counsel, stated in a press release. 

“By proceeding with an interim final rule, the administration has deprived the American public of their right to provide input on these drastic changes before they are implemented. Alarmingly, they have used COVID-19 as a baseless pretext for skipping normal rulemaking, having delayed the issuance of a proposed rule for nearly two years,” he continued.  

Americans pay more per capita for prescription drugs than residents of any other developed country in the world. One reason why officials believe this to be true is that other countries regulate drug prices by negotiating with drug manufacturers to secure bargain prices. This leaves America to make up this difference.

Therefore, President Trump signed anexecutive order in mid-September to lower prescription drug prices by “putting America first.”

Under the executive order, the drugs covered under the MFN pricing scheme, which includes both Medicare Part B and Medicare Part D, will be expanded.

But experts expressed many concerns around potential challenges that could arise from the new executive order. For example, PhRMA, ACCC, GCAA, and NICA stated that the MFN Rule exceeds statutory authority provided to CMS.

Under the current Medicare statute, reimbursement for prescription drugs covered under the Part B program is based on average prices paid for drugs domestically. 

But the new rule implements a mandatory and nationwide payment scheme and bases reimbursement on the lowest price available in any one of the other countries included, despite how those countries structure their healthcare systems. 

The organizations emphasized that this is approach will be “detrimental” to patient access to innovative medicines. 

For example, nearly 90 percent of new medicines launched since 2011 are available to patients in the US compared to an average of only 49 percent for some of the countries included in the MFN Rule. 

Additionally, the MFN Rule would also do “very little” to reduce patient costs at the pharmacy, lowering out-of-pocket costs for less than one percent of seniors in Medicare Part B. 

The organizations stressed that the MFN Rule will harm patients, care providers, physicians, pharmaceutical manufacturers, and the broader public interest in innovation and discovery in the pharmaceutical field.

Therefore, physicians and healthcare providers will be short-changed, pharmaceutical manufacturers will be forced to accept significant price reductions and push back launches in markets, and long-term public health will be threatened due to setbacks in research and development of new drugs. 

“The Rule will restrict and disrupt access to care, force patients to switch from a drug that effectively manages disease to a less-effective drug for reasons unrelated to health or safety, and impair providers’ ability to provide adequate care,” said Brian Nyquist, chief executive officer at NICA. 

“This will result in adverse health outcomes, reduced quality of life, increased physical and emotional burdens of disease, and increased cost to both patients and Medicare,” he concluded.