A federal court has rejected a bid by the pharmaceutical industry and its allies to stop the newly established Medicare drug price negotiation program before it starts. On September 29, 2023, Judge Michael J. Newman of the U.S. District Court for Southern District of Ohio denied a request to block implementation of the program. The Center for Medicare Advocacy is encouraged by the ruling, which correctly assessed the drug manufacturer’s claims to be weak in the face of clearly established law.
The drug price negotiation program, created by the Inflation Reduction Act, allows Medicare to use its bargaining power to negotiate the prices of prescription drugs for the first time. Drug manufacturers have filed multiple lawsuits around the country alleging various constitutional claims, including that the program is an unconstitutional “taking” of property without just compensation, a violation of due process, and a violation of drug companies’ First Amendment free speech rights. The case brought by the U.S. Chamber of Commerce and several affiliates in Ohio was the only one seeking “preliminary” injunctive relief that would have blocked the program from implementation before the negotiation process began.
In its ruling, the court found that the Chamber and other plaintiffs had demonstrated neither likelihood of success on the merits nor irreparable harm, which are required for a preliminary injunction. It cited “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 program. The court also found that any economic harm was too speculative to warrant immediate relief. (Negotiated prices take effect in 2026.) However, the court denied the government’s motion to dismiss the case, indicating that more information on whether the plaintiffs have standing to sue would be beneficial. The judge is therefore allowing for limited discovery to clarify issues related to standing, after which the government may renew its motion to dismiss.
For now, Medicare may continue to implement the negotiation program as this case and others proceed. The agency announced this week that the drug companies that manufacture all 10 drugs that were selected for the first cycle of negotiations have chosen to participate in the program. Medicare announced the first 10 drugs in August. Those drugs cost Medicare beneficiaries $3.4 billion in out-of-pocket costs in 2022 alone. The law provides for additional expensive drugs to be selected for price negotiation each year.
The Medicare drug price negotiation program enjoys overwhelming public support. The Center strongly endorses these negotiations as a critical step in addressing out-of-control drug costs in the Medicare program. Other courts should follow the Ohio judge’s lead and should not be persuaded by the drug companies’ meritless claims.
October 5, 2023 – A. Bers