Judge upholds Medicare drug price negotiation program, but more lawsuits are being considered in other courts

Medicare’s historic drug price negotiation program has survived its first court challenge by a drugmaker.

A federal district court judge in Delaware on Friday rejected AstraZeneca’s claims that the negotiation program was unconstitutional and deprived the pharmaceutical company of its protected property interest.

AstraZeneca’s Farxiga drug, which treats chronic kidney disease, heart failure and Type 2 diabetes, was among the 10 medications selected last year for the initial round of price negotiations with Medicare. The effort was authorized by the Inflation Reduction Act, which Democrats pushed through Congress in 2022.

The drugmakers countered, filing multiple lawsuits across the country that argued the negotiation program violated the US Constitution in a variety of ways.

Chief Judge Colm Connolly, who was appointed by former President Donald Trump, said that the property interest AstraZeneca claims should be protected under the Fifth Amendment is its ability to sell its drugs at prices higher than the maximum amounts established by the Inflation Reduction Act.

“No one, however, is entitled to sell the Government drugs at prices the Government won’t agree to pay,” Connolly wrote in his ruling, noting that drugmakers’ participation in Medicare and the negotiation program are voluntary.

“The whole point of the Program is to lower the prices of selected drugs that lack generic competition and account for a disproportionate share of Medicare’s expenses,” Connolly wrote. “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.”

Connolly also dismissed AstraZeneca’s contention that the negotiation program’s incentive to sell products to millions of Medicare beneficiaries is “a gun to the head.”

“It is a potential economic opportunity that AstraZeneca is free to accept or reject,” he wrote.

The judge also dismissed the company’s challenge over how the Centers for Medicare and Medicaid Services determined which drugs are eligible for negotiation, saying that the claims of harm were speculative.

AstraZeneca said that it is “disappointed with the court’s decision and the potential negative impact it will have on patients’ access to future life-saving medicines.” The company is “actively evaluating our path forward.”

Negotiations are underway

Medicare sent its initial offers to the drugmakers in early February. Negotiations will take place between now and August 1. The agreed-upon maximum fair prices will be made public by September 1 and take effect in 2026.

In addition to Farxiga, the first drugs are Eliquis, Jardiance, Xarelto, Januvia, Entresto, Enbrel, Imbruvica and Stelara, as well as Fiasp and certain other insulins made by Novo Nordisk, including NovoLog. The medications, which treat heart disease, certain cancers, diabetes and autoimmune diseases, among other conditions, cost Medicare $46.5 billion and enrollees $3.4 billion in out-of-pocket costs in 2022.

The drugmakers – which include Bristol Myers Squibb, Merck, Johnson & Johnson’s Janssen division and Novo Nordisk, among others – have filed multiple lawsuits in federal courts across the US in hopes of stopping the negotiation effort. In addition to challenging the constitutionality of the program, several companies have said they were essentially forced to participate or otherwise face steep penalties or withdrawal from the Medicare and Medicaid markets.

Friday’s ruling is the third win for the Biden administration in federal district courts.
A Texas judge last month dismissed a lawsuit brought by the pharmaceutical industry’s main lobbying group and two other organizations, while an Ohio judge last year denied an attempt by the US Chamber of Commerce to immediately stop the negotiation program’s implementation.

“Litigation involving the drug negotiation program will be ongoing for months, if not years,” said Andrew Twinamatsiko, a director at the O’Neill Institute for National and Global Health Law at Georgetown University.

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