What to know about the legal battle against Medicare drug price negotiations

by Joseph Choi - 07/26/23 6:01 AM ET

The court battle over Medicare’s drug price negotiation program continues to heat up ahead of a key date for deciding which drugs will be included.

As of last week, there are now five organizations — three pharmaceutical companies and two trade groups — suing the federal government over the Medicare Drug Price Negotiation Program established through the Inflation Reduction Act (IRA).

The program is a key pillar of the Biden administration’s health care agenda, and the White House has maintained the law is on its side when it comes to its authority to implement negotiations.

Here’s what to know about the Medicare drug price negotiation legal battle:

The timeline

The program was enacted by President Biden nearly one year ago, when he signed the IRA into law in August.

Since then, the Centers for Medicare & Medicaid Services (CMS) has been laying the groundwork for negotiations. Initial guidance was released in March, with a revised version including responses to the industry pushback released last month.

Negotiations are expected to take place over 2023 and 2024.

In early June, pharmaceutical giant Merck became the first entity to file a lawsuit challenging the federal government’s negotiation plan, blasting it as a “sham.” The company took issue with what it characterized as coercive tactics that left it little choice but to agree to the government’s proposed prices.

Representatives from the company have said Merck is not opposed to negotiations, but argued that the process set before them is unconstitutional.

The first 10 drugs that will be subject to Medicare price negotiation are set to be announced at the start of September.

Under the current schedule, the negotiated prices will go into effect at the start of 2026.

Legal arguments

Shortly after Merck filed its challenge, the Chamber of Commerce, Bristol Myers Squibb and the Pharmaceutical Research and Manufacturers of America (PhRMA) filed their own lawsuits against the federal government.

Johnson & Johnson became the most recent plaintiff to challenge the negotiation program when it filed its own lawsuit last week.

These organizations have pointed to a handful of constitutional amendments that they claim the CMS is in violation of — in what legal experts told The New York Times is a strategy “directly targeted at the Supreme Court.”

The two most commonly cited amendments are the First and Fifth Amendments.

The First Amendment claim comes from the plaintiffs’ argument that engaging in negotiations is compelled speech — essentially forcing companies to agree with the process when they do not.

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The Fifth Amendment states that “private property be taken for public use, without just compensation,” and the plaintiffs argue that the negotiated prices — though not yet decided — are not just compensation for their products.

The plaintiffs have asked that courts find the process to be unconstitutional and that any manufacturer agreements be declared null and void.

Possible delay

Going one step further than other plaintiffs, the Chamber of Commerce filed a motion earlier this month requesting a preliminary injunction on the Medicare Drug Price Negotiation Program.

The lobbying group asked the U.S. District Court for the Southern District of Ohio to block the negotiation program from operating on the basis that it would cause “irreparable harm” to its members.

The request for a preliminary injunction asked for a decision to be made by Oct. 1, exactly one month after the first 10 drugs eligible for negotiation are set to be announced. The start of October is also the deadline by which manufacturers will have to sign agreements with the Health and Human Services Secretary to engage in negotiations.

The various lawsuits have been filed in different jurisdictions across the country, in what legal experts say appears to be an effort to improve the industry’s chances of having their case heard at the Supreme Court. That could also extend the legal battle and any potential injunctions handed down along the way.

Congress staying out of the fight

Most members of Congress have so far refrained from commenting on the ongoing legal battle.

Democratic lawmakers such as Rep. Frank Pallone Jr. (D-N.J.), Sen. Patty Murray (D-Wash.) and Sen. Ron Wyden (D-Ore.) have criticized the lawsuits, but the majority of Capitol Hill has stayed out of the fray.

After Merck filed its lawsuit, Murray released a statement saying, “Merck is doing everything it can to protect its profits at the expense of patients who need their prescriptions to stay healthy and get treatment for everything from cancer to diabetes.”

“While big drug companies may not want to be at the negotiating table, the American people are sick and tired of giant pharmaceutical corporations putting their executives’ paychecks above patients—and Democrats will keep fighting back to put patients over profits at every turn,” she added.

Wyden said the lawsuits underscored the need for Biden’s continued presence in the Oval Office.

“I have deep concerns that a Republican administration would roll out the red carpet for Big Pharma and once again ban Medicare from negotiating lower drug prices,” Wyden said after PhRMA announced its suit.

When it comes to reducing drug costs, Congress has focused the bulk of its recent attention on pharmacy benefit managers (PBM), with the Senate Finance Committee holding a hearing this week to mark up the Modernizing and Ensuring PBM Accountability Act.

While PBMs remain a rare area of bipartisan agreement in Congress, it’s unclear when House or Senate leadership will try to move the legislation, which Democrats are seeking to link with efforts to reduce insulin costs.

The first 10 drugs

The CMS has not indicated what drugs will be first up for negotiations, though this hasn’t stopped stakeholders from speculating on what will make the list.

A study published in the Journal of Managed Care & Specialty Pharmacy in March identified the drugs Eliquis, Xarelto, Januvia, Jardiance and Symbicort as likely to be among the first 10 to be chosen, based on the age of the drugs and the gross Medicare Part B and Part D spending on them in 2020.

Eliquis and Xarelto are used to treat blood clots; Januvia and Jardiance are prescribed for Type 2 diabetes; and Symbicort is a bronchodilator used to treat asthma and COPD.

Eliquis, Xarelto and Januvia are each manufactured by one of the plaintiffs suing the federal government. The same study projected that additional drugs made by the plaintiffs would be included in Medicare negotiations in the following years.

Tags drug price negotiations drug prices Hunter Biden Inflation Reduction Act Joe Biden Medicaid medicare Merck