The rule was blocked hours before it was set to take effect, the latest setback for the White House as Trump administration officials continue to search for ways to pressure pharmaceutical companies into lowering their prices - a proposal made by the Trump administration in the run up to last November's midterm election.
In February, Merck CEO Kenneth Frazier and six other pharmaceutical executives testified in front of the Senate Finance Committee about ways to address rising prescription drug prices. The challenge opponents say is that a drug's list price and estimates of what people can expect to pay varies widely depending on coverage.
Amgen, Merck, and Eli Lilly, three of the largest United States drug companies, and the Association of National Advertisers filed the lawsuit last month, claiming HHS lacked the legal authority to enforce the rule, which would have mandated that pharmaceutical ads display the list price of a 30-day supply of any drug covered under Medicare or Medicaid costing more than $35.
The rule was originally suggested in May 2018 as part of Trump's "blueprint" to lower prescription drug costs for US consumers. The logic behind the move would be to compel drugmakers to lower prices to avoid a potential consumer backlash if the general population is aware of their drug prices.
"No matter how vexing the problem of spiraling drug costs may be, HHS can not do more than what Congress has authorized", Mehta wrote.
Drug companies complained the rule would "confuse" and "intimidate" patients because insurers, including Medicare and Medicaid, negotiate discounts with drug companies, meaning the list price, often much higher, could cause sticker shock.
"President Trump and Secretary Azar remain focused on lowering drug prices and empowering patients through more transparency in healthcare costs", said Caitlin Oakley, spokeswoman for the agency, referring to HHS Secretary Alex Azar.
"Today's ruling is a step backward in the battle against skyrocketing drug prices and providing more information to consumers", the group said.
U.S. District Judge Amit Mehta, in a 27-page ruling, said the administration, which announced the initiative in May, had failed to show it possessed the proper legal authority. HHS said the 10 most commonly advertised drugs have list prices of $488 to $16,938 per month or for a usual course of therapy.