In nine lawsuits filed across the country, the pharmaceutical industry is challenging the Medicare drug price negotiation program established by the Inflation Reduction Act (IRA). So far, the drug companies have not scored any victories, which means Medicare beneficiaries are winning. The Center for Medicare Advocacy is part of a coalition of advocates supporting the negotiation program by filing amicus curiae (“friend of the court”) briefs explaining the importance of the program to Medicare beneficiaries. For instance, in an amicus brief filed in a case brought by a Connecticut drug company, the Center highlighted the voices of Connecticut Medicare beneficiaries who have struggled to pay high prescription drug costs. (Read the brief here.)
The drug price negotiation program allows Medicare to use its considerable bargaining power to negotiate the price of prescription drugs. Medicare beneficiaries (and other Americans) pay significantly more for drugs than people in other countries. This stems in part from the pharmaceutical industry using its power to prevent the federal government from negotiating Medicare drug prices. The enactment of the IRA in 2022 marks the first time beneficiary advocates realized their longtime goal of bringing cost savings to Medicare-covered drugs through negotiation. The negotiated prices on the first set of ten Part D drugs will take effect in 2026, with more drugs entering the negotiation program each year.
Several drug companies and their allies have raised constitutional and statutory claims against the negotiation program in lawsuits around the country. An ongoing summary of the status of these cases can be found here. To date, the court decisions have been encouraging:
- As outlined in a previous Alert, in October 2023 a federal district court in Ohio denied a bid by the U.S. Chamber of Commerce to stop the negotiation program before it started. The ruling denied a preliminary injunction, citing “clear” law that participation in the Medicare program is completely voluntary, no matter how vital it may be to a company’s business model. Thus, the price established by negotiation cannot be considered “confiscatory,” as the Chamber claimed, or a violation of due process, because drug manufacturers can opt out of Medicare entirely. They are not compelled to sell drugs at the prices established by the negotiation program. The court also found that any economic harm to drug manufacturers was too speculative to warrant immediate relief.
- In February 2024, a federal district court in Texas granted the government’s motion to dismiss a lawsuit brought by PhRMA, the pharmaceutical industry’s main advocacy organization, and affiliated organizations. It requests that the court block the government from implementing the negotiation program. The court found that because it lacked jurisdiction over the claims of the only plaintiff organization located in Texas, venue in the Texas court was improper. PhRMA has appealed the decision.
- Earlier this month, in March 2024, a federal district court in Delaware denied AstraZeneca’s motion for summary judgment and granted the government’s motion for summary judgment in the drug company’s challenge to the IRA and CMS’s guidance as to its implementation. AstraZeneca claimed that the guidance violates the Administrative Procedure Act and that the negotiation program violates constitutional due process. The court found that AstraZeneca lacks standing to challenge the CMS guidance because it had not established that it was harmed. It also found that the drug company’s due process claim failed as a matter of law. The court noted that “the property interest encompassed by AstraZeneca[]…is at bottom the ability to sell products to Medicare beneficiaries at prices above what the IRA requires. No one, however, is entitled to sell the Government drugs at prices the Government won’t agree to pay.” The court also noted that the “whole point” of the negotiation program is to lower the prices of certain Medicare-covered drugs. “Understandably, drug manufacturers like AstraZeneca don’t like the IRA. Lower prices mean lower profits. Drug manufacturers like AstraZeneca desire the old pricing regime, and they lobbied and perhaps expected Congress not to pass the IRA in 2022….But AstraZeneca’s ‘desire’ or even ‘expectation’ to sell its drugs to the Government at the higher prices it once enjoyed does not create a protected property interest.”
More district court decisions are expected in the coming months and action will then turn to appellate courts. The Center for Medicare Advocacy is encouraged by the courts’ decisions thus far and will continue to strongly support the Medicare drug price negotiation program.
March 21, 2024 – A. Bers