FAN 215 HHS Drug Prescription Price Rule Challenged

June 19, 2019

In a case recently filed in the federal district court for the District of Columbia, a Health and Human Services rule regulating price information of prescription drugs was challenged on First Amendment and statutory grounds.

The case is Merck & Co. et al v. U.S. Dept. of Health & Human Services Case 1:19-cv-01738, filed 06/14/19. Here are a few excerpts from the complaint filed by Richard P. Bress (lead counsel for Merck & Co.) and Robert Corn-Revere (lead counsel for the Association of National Advertisers):

Richard P. BressRichard P. Bress

Americans deserve accurate information about the price they will pay for prescription drugs. This case involves a rule adopted by the Department of Health and Human Services (HHS) that purports to further that objective, but will instead frustrate it—by misleading patients about their out-of-pocket costs for prescription drugs in a manner that even HHS admits may “confuse[]” and “intimidate[]” patients, “discourage patients from using beneficial medications, reduce access, and potentially increase total cost of care.” HHS, Centers for Medicare & Medicaid Services, Medicare and Medicaid Programs; Regulation to Require Drug Pricing Transparency, 84 Fed. Reg. 20,732, 20,756 (May 10, 2019).

Relying on an unprecedentedly broad construction of the agency’s statutory authority to enact regulations necessary for the “efficient administration” of the Medicare and Medicaid programs, the rule at issue requires virtually all direct-to-consumer pharmaceutical television advertisements to include a specific, government-scripted statement highlighting what the rule describes as the “list price” of the advertised product.

Robert Corn-RevereRobert Corn-Revere

That “list price” is not, as patients will likely infer from the context, a suggested sales price for the retail transactions contemplated in advertisements. Rather, the rule requires manufacturers to use the gross price at which a prescription drug is offered to wholesalers, before rebates, discounts, or any other adjustments are applied. And the mandated price figure not only ignores such wholesale price adjustments, but also fails to account for the insurance coverage that a significant majority of Americans have for their retail purchases of prescription drugs. As a result, the “list price” that the rule requires manufacturers to convey to patients is often multiple times higher than the out-of-pocket price that a substantial majority of Americans would pay for the advertised products. Far from promoting transparency and improved decision-making, therefore, the rule would instead force pharmaceutical companies to mislead tens of millions of Americans about the price they would actually pay for important medicines that might improve their health or even save their lives. For the reasons set out below, the rule exceeds HHS’s statutory authority, violates the First Amendment, and should therefore be set aside.

The legal arguments made in their memorandum in support of a stay pending judicial review are summarized in part below:

I.  The Compelled WAC Disclosure Rule Exceeds HHS’s Authority Under the Social Security Act 

  1.  Congress Has Spoken Clearly—And Imposed Clear Limits—When It Has Intended To Authorize HHS To Regulate Advertising
  2. HHS Cannot Expand Its Authority Over Advertising By Invoking Its Ability To Promulgate Regulations Necessary For The Administration Of The Medicare And Medicaid Programs

II.  The Compelled WAC Disclosure Rule Violates the First Amendment

  1. The Compelled WAC Disclosure Rule Cannot Survive Intermediate Scrutiny
  2. HHS Cannot Carry Its Burden To Show That The Compelled WAC Disclosure Rule Is Eligible For, And Would Pass Muster Under, Zauderer’s More Deferential Review

Supreme Court Hands Down Ruling in First Amendment State Action Case

On Monday, the Court handed down its ruling in Manhattan Community Access Corp. v. Halleck. Over at Constitutional Law Prof Blog, Professor Ruthann Robson offers an informative and insightful overview of the Court’s majority and dissenting opinions. Here are a few excerpts:

>Prof. Ruthann Robson>Prof. Ruthann Robson

In its divided opinion in Manhattan Community Access Corporation v. Halleck, a majority of the United States Supreme Court held that the actions of a private nonprofit corporation operating a public access television channel did not constitute sufficient state action warranting application of the First Amendment. . . .

Writing for the majority, Justice Kavanaugh, joined by C.J. Roberts, and Justices Thomas, Alito, and Gorsuch, concluded that general constitutional state action doctrine was the threshold — and determinative — issue.  The Court rearticulated the applicable state action doctrine governing when a private entity can qualify as a state actor as limited to a few circumstances:

(i) when the private entity performs a traditional, exclusive public function (citing Jackson v. Metropolitan Edison Co.(1982));

(ii) when the government compels the private entity to take a particular action (citing Blum v. Yarestsky (1982);

(iii) when the government acts jointly with the private entity (citing Lugar v. Edmondson Oil Co. (1982)).

. . .

Justice Kavanaugh’s opinion focused on the first circumstance, and stressed that the requirement means that the government must have traditionally and exclusively performed the function. Given that the relevant function was defined as the “operation of public access channels on a cable system,” the Court had little difficulty in concluding that the requirement was not met under a “commonsense principle”:

Providing some kind of forum for speech is not an activity that only governmental entities have traditionally performed. Therefore, a private entity who provides a forum for speech is not transformed by that fact alone into a state actor. After all, private property owners and private lessees often open their property for speech. Grocery stores put up community bulletin boards. Comedy clubs host open mic nights.

The majority further rejected the plaintiffs’ argument that state action was present because New York City designated MNN to operate the public access channels and New York state heavily regulates public access channels. . . .

The majority also rejected the plaintiffs’ argument that the public access channels are the “property” of the state of New York rather than the property of the cable network (Time Warner) or of MNN itself. . . .

Dissenting, Justice Sotomayor, joined by Justices Ginsburg, Breyer, and Kagan, argued that the majority misconstrued the case before the Court and this case is actually “about an organization appointed to administer a constitutional public forum” and not simply “about a private property owner that simply opened up its property to others.” For the dissenting Justices, when MNN accepted the contractual agency relationship, it “stepped into the City’s shoes and thus qualifies as a state actor, subject to the First Amendment like any other.”  The dissent argued that MNN was not simply a private actor that “simply sets up shop against a regulatory backdrop,” but that it occupies its role because it was asked by New York City to do so, and was deputized by the city to administer the public access channels.  The dissent also argued that the requirement that the private actor be performing a traditional and exclusive function only applies when the “private actor ventures of its own accord into territory shared (or regulated) by the government.” . . .

[W]hile the decision seems narrow, it could be a harbinger of a narrowing of state action doctrine to release private entities that contract with the state from constitutional constraints unless the entities are performing a traditional and exclusive function of the government, even if the entities are “in the shoes” of the state.

SCOTUS Reverses & Remands Oregon Cake Case

After considerable delay, the Supreme Court finally acted on Klein v. Oregon Bureau of Labor and Industries. The issues raised in the case were:

(1) Whether Oregon violated the free speech and free exercise clauses of the First Amendment by compelling the Kleins to design and create a custom wedding cake to celebrate a same-sex wedding ritual in violation of their sincerely held religious beliefs; (2) whether the Supreme Court should overrule Employment Division, Department of Human Resources of Oregon v. Smith; and (3) whether the Supreme Court should reaffirm Smith’s hybrid-rights doctrine, applying strict scrutiny to free exercise claims that implicate other fundamental rights, and resolve the circuit split over the doctrine’s precedential status.

In its order released on Monday, the Justices reversed and remanded the case in light of Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission.

Amy Howe, Justices Send Cake Sequel Back to State Court, SCOTUSblog (2019)

$44M in Damages in Defamation Suit Against Oberlin College

This from First Amendment Watch:

A jury in Ohio awarded $33 million in punitive damages to a local bakery that had sued Oberlin College for libel and slander.

The complaint filed in Ohio state court in November 2017, alleged that Oberlin was complicit in supporting and encouraging student protests against Gibson’s bakery following the arrests of three African American students.

On November 9, 2016, Oberlin students Jonathan Aladin, Cecelia Whettston, and Endia Lawrence entered Gibson’s Bakery, whereupon Aladin attempted to steal two bottles of wine. The storeowner’s son followed Aladin outside and wrestled him to the ground until the police arrived.

Aladin and his friends were immediately arrested and charged; Aladin with robbery, a second-degree felony, and Whettston and Lawrence with first-degree misdemeanor assault.

Oberlin students began protesting the store, passing out fliers calling the bakery “a racist establishment with a long account of racial profiling and discrimination.”

The complaint alleges that school faculty, including its Dean of Students, Meredith Raimondo, “handed out hundreds of copies of the flyer to Oberlin College faculty, staff, and students, the Oberlin community, and media representatives.”

On June 10, an Ohio jury sided with the bakery’s defamation claims, and awarded the owners $11 million in compensatory damages. On June 14, the jury awarded another $33 million in punitive damages.

FIRE Questions Constitutionality of Texas Sexual Harassment Bills

This from an article by Tyler Coward over at FIRE:

FIRE has written twice recently about two bills in the Texas legislature that seriously threaten free speech and due process rights at college campuses in the state. We also sent a letter to Texas Gov. Greg Abbott’soffice asking him to veto the bills. On Friday, however, Abbott signed those bills into law.

As a brief recap, both pieces of legislation — SB 212 and HB 1735 — use an unconstitutionally overbroad definition of sexual harassment that lacks the fundamental requirement that the conduct in question be objectively offensive to a reasonable person. SB 212 compounds the problem further by requiring all college and university employees to report any conduct they reasonably believe satisfies that definition to the institution’s Title IX apparatus. Failure to do so subjects the employee to termination and criminal misdemeanor charges, which carry potential penalties of up to $2,000, 180 days in jail, or both.

HB 1735 will take effect Sept. 1. Most of SB 212’s provisions also take effect on Sept. 1, while the bill’s criminal penalties take effect Jan. 1, 2020. This means Texas’s students and faculty will be forced to navigate new, unconstitutional speech codes this academic year that will inevitably lead to an explosion of frivolous investigations into protected speech, self-censorship, and possibly even jail time for faculty members who run afoul of the new law.

Lakier on First Amendment’s Lochner Problem

One of the most common criticisms of contemporary free speech law is that it is too Lochnerian. What critics usually mean by this is that First Amendment doctrine, by extending significant constitutional protection to advertising and other kinds of commercially-oriented speech, makes the same mistake as the Supreme Court made in Lochner v. New York, and other early late nineteenth and early twentieth century Due Process Clause cases: namely, it grants judges too much power to second-guess the economic policy decisions of democratically-elected legislatures.

Prof. Genevieve LakierProf. Genevieve Lakier

This Article challenges that argument — not to reject the idea that contemporary free speech law resurrects Lochner, but instead to reconceive what that means. It argues that contemporary free speech law is not Lochner-like in failing to defer to the legislature’s economic policy decisions. Instead, it repeats the errors of the Lochner Court by relying upon an almost wholly negative and anti-redistributive notion of freedom of speech. The result is a body of law that, not just in its commercial and corporate speech cases, but in many other cases as well, replicates Lochner Era due process jurisprudence in both its doctrinal structure and its political economic effects.

By reconceiving the Lochner analogy, this Article illuminates fundamental problems with the contemporary First Amendment. By examining the ways in which the First Amendment once fit into the New Deal Settlement, but does so no longer, it also suggests a far more satisfying solution to the First Amendment’s Lochner problem than the conventional account allows. Rather than narrowing the scope of the First Amendment or weakening the constitutional protection afforded commercially-oriented speech, it argues that courts should embrace a more positive conception of the free speech guarantee and one that can more effectively protect expressive freedom from the threats posed to it by private as well as public power. Doing so, it acknowledges, may make what are today relatively easy free speech disputes much more difficult. But there is ultimately no other way to vindicate First Amendment values — including, the core democratic value of ensuring a diverse and inclusive public debate.

Belated: In Memoriam: Constitutional Law Scholar Kenneth Karst

In case you missed the notice, as did I, UCLA Professor Kenneth Karst (a most kind man) died last April. He was 89.

His 1975 University of Chicago Law Review article,Equality as a Central Principle in the First Amendment, article was a seminal work in establishing a conceptual link between equality and liberty in the free speech context. Here’s an excerpt:

Prof. Kenneth KarstProf. Kenneth Karst

The ideal of equality runs deep in the American tradition.’ A just society, we believe, must offer “equal liberties ‘ in the realm of political participation. Within the past generation, this tradition has flowered into a number of new constitutional doctrines, aimed at effectuating the ideal of political equality. In the aggregate, these doctrines mark the emergence of a principle of equal liberty of expression, not merely in the political arena, but throughout all the interdependent “decisionmaking” processes of a complex society.

A natural doctrinal vehicle for promoting the principle of equal liberty of expression is the guarantee of equal protection of the laws. In a number of recent cases involving first amendment interests, the Supreme Court has used the framework of equal protection analysis to limit government’s power to restrict free expression.’ This approach has met with the objection, both within and outside the Court, that the first amendment itself would have been a more appropriate ground for decision.  Framing the problem of free expression in equal protection terms, it is said, misses the basic purpose of the first amendment, which is not equality but liberty.’ By emphasizing the equality principle, the Court may invite government to equalize not by lifting restrictions from some but by suppressing the expression of all The principle of equality may have its uses in ensuring the freedom of expression, the critics argue, but those uses are marginal to the first amendment’s main goals.

Forthcoming Books

New Book

Unfreedom of the Press is not just another book about the press. Levin shows how those entrusted with news reporting today are destroying freedom of the press from within: “not government oppression or suppression,” he writes, but self-censorship, group-think, bias by omission, and passing off opinion, propaganda, pseudo-events, and outright lies as news.

With the depth of historical background for which his books are renowned, Levin takes the reader on a journey through the early American patriot press, which proudly promoted the principles set forth in the Declaration of Independence and the Constitution, followed by the early decades of the Republic during which newspapers around the young country were open and transparent about their fierce allegiance to one political party or the other.

It was only at the start of the Progressive Era and the twentieth century that the supposed “objectivity of the press” first surfaced, leaving us where we are today: with a partisan party-press overwhelmingly aligned with a political ideology but hypocritically engaged in a massive untruth as to its real nature.

From The Volokh Conspiracy

Conway, the Hatch Act & the First Amendment

Hudson on 11th Cir. Ruling in Inmate Retaliation Case

Podcast: Oslo Freedom Forum Special with Larry Diamond

This from the Clear and Present Danger podcast (FIRE):

Prof. Larry DiamondProf. Larry Diamond

[This] episode is [] a radical departure from the chronological timeline of the general podcast so far. I’m currently in Oslo for the annual Oslo Freedom Forum, organized by the Human Rights Foundation. The Oslo Freedom Forum is a unique gathering of human rights and democracy activists from all over the world joining forces to connect, share ideas and build alliances to strengthen freedom and undermine authoritarianism. To take advantage of the Oslo Freedom Forum I have decided to do a number of Expert Opinions on current cutting-edge topics related to free speech. The first episode will look at the why the so-called “Democratic Recession” is mirrored by a “Free Speech Recession,” with Stanford Professor Larry Diamond. In this discussion we explore:

  • The nature and consequences of the “Democratic Recession”
  • Why restricting freedom of expression is the precondition for the assault on democracy
  • Why and modern authoritarian populist repression differs from the totalitarian methods of the 20th century
  • An exposé of the step-by-step authoritarian´s guide to dismantle independent media, dissent and civil society (meant as a warning not a manual!)
  • Why restrictions of free speech in liberal democracies embolden censorship efforts in authoritarian regimes
  • The consequences of the current American administration´s hostility to independent media and disengagement from promoting free speech norms
  • Whether social media has been a net benefit or liability to the causes of free speech and democracy
  • Why and how global norms matter, and can help reverse the “Free Speech Recession”

Larry Diamond is professor of Political Science and Sociology at Stanford University and Senior Fellow at the Hoover Institution, and founding co-editor of the Journal of Democracy. He has written extensively on democracy and is most recently the author of Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency.

Podcast: What the Battle To Publish Allen Ginsberg’s Howl Means to Today’s Free-Speech Struggles

Over on Reason’s podcast, Nick Gillespie talked to me and co-author David M. Skover about our book, The People v. Lawrence Ferlinghetti: The Fight to Publish Allen Ginsberg’s “Howl”:

a fast-paced history of the obscenity trial that ended in a watershed victory for free expression. A poet in his own right—his A Coney Island of the Mind has sold over one million copies—Ferlinghetti remains at 100 years old an amazing character: a World War II battle veteran turned pacifist, a civil libertarian, and a socialist. Gillespie talks with Collins about the enduring relevance of Ferlinghetti’s trial to contemporary attempts to shut down speech and expression that some people find offensive.

So to Speak Podcast on Intellectual Property & First Amendment 

This week’s episode of FIRE’s So to Speak podcast is:

all about simplifying intellectual property law for you — and explaining why free speech advocates should care about it. We are joined by FIRE Program Officer (and intellectual property whiz) Adam Goldstein, who helps us break it all down.

Free Speech Issues Abroad

After thirty years of armed conflict which claimed the lives of an estimated 200,000 civilians, Guatemala has struggled to control parallel criminal organizations that have captured state institutions. After making progress in recent years, a crackdown on anti-corruption efforts and the independence of the judiciary has jeopardized recent gains and compromised the checks and balances necessary to ensure that the upcoming presidential elections are legitimate. Against this backdrop, coordinated, state-aligned campaigns of online disinformation and coded threats pose a unique challenge for SMCs and contribute to the greater culture of impunity for violence against human rights defenders and marginalized communities while significantly increasing the risk of violence against them.

Other Items in the News

2018–2019 Term: Free Expression & Related Cases

Rulings & Opinions

Summary Action

Cert. Granted

Pending: Cert. Petitions

Cert. Denied

FOIA: Review Granted

Review Granted: Free Expression Related Cases

Pending Free Expression Related Case

Last Scheduled FAN

This article is part of First Amendment News, an editorially independent publication edited by Professor Ronald K. L. Collins and hosted by FIRE as part of our mission to educate the public about First Amendment issues. Opinions expressed are those of the article's author(s) and may not reflect the opinions of FIRE or of Professor Collins.