Who is Challenging the Medicare Drug Price Negotiation Rule?
Drug companies and pharmaceutical groups are suing HHS, arguing that the Medicare drug price negotiation rule violates constitutional amendments.
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- The Medicare drug price negotiation provisions in the Inflation Reduction Act hold promising spending reductions for beneficiaries, but drug companies are not backing down without a fight.
In August 2023, HHS announced the first ten drugs that will be available for Medicare price negotiation starting in 2026. The Department will undergo negotiations with drug companies in 2023 and 2024 for the following drugs: Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp and NovoLog drugs.
The drugs treat various conditions, such as blood clots, diabetes, chronic kidney disease, heart failure, rheumatoid arthritis, and blood cancers. Between June 2022 and May 2023, the ten drugs accounted for $50.5 billion in total Part D gross prescription drug costs, or 20 percent of the total expenses.
All ten drug companies have chosen to participate in the negotiation process. Following negotiations, CMS will release the new drug prices on September 1, 2024.
Although the selected drug companies have agreed to negotiations, pharmaceutical leaders have not responded positively to the policies. Several companies and organizations filed lawsuits against HHS even before the Department released the first ten drugs. Many of the cases claim that the program violates several constitutional amendments.
Merck
READ MORE: HHS Releases First 10 Drugs Eligible for Medicare Price Negotiation
Merck, whose drug Januvia is included in the first ten drugs subject to negotiation, filed its lawsuit in June and claims that the policy violates the First and Fifth Amendments.
The company called the drug price negotiation a program a sham that “involves neither genuine ‘negotiations’ nor real ‘agreements.’” The lawsuit explained how if manufacturers do not participate in the negotiation or agree to the negotiated price, they will incur a “ruinous daily excise tax amounting to multiples of the drug’s daily revenues.”
“The only conceivable purpose of this circuitous regime is political deception—to allow the Government to pretend, as it already has done, that HHS’s prices are not top-down mandates but the product of voluntary ‘agreements’ with companies who concede they are ‘fair,’” the lawsuit stated. “Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids.”
Merck also stated that Medicare is using the price negotiation program to obtain prescription drugs without paying fair market value, violating the Fifth Amendment requirement that the government pay just compensation if it takes property for public use.
Dayton Area Chamber of Commerce
The Dayton Area Chamber of Commerce also filed its lawsuit against HHS in June. The United States, Michigan, and Ohio chambers of commerce joined the complaint, which argues that the negotiation policies violate the First, Fifth, and Eighth Amendments.
READ MORE: Adjusting Medicare Drug Price Negotiation Criteria May Increase Savings
Similar to Merck’s lawsuit, the complaint says the program gives HHS unjust power to require drug manufacturers to participate in negotiations. The chambers of commerce also argued that the program violates the Excessive Fines Clause of the Eighth Amendment, which limits the government’s power to extract payments as punishment for an offense.
The lawsuit claims the price negotiation policies violate the Due Process Clause of the Fifth Amendment by establishing an illegal price-control scheme.
The plaintiffs called for the negotiations to be paused amid the various ongoing legal challenges, but US District Court Judge Michael Newman rejected their arguments. The order denied the plaintiffs’ motion for a preliminary injunction and required them to file an amended complaint by October 13, 2023.
Newman determined that the plaintiffs have not demonstrated evidence that the program violates the Fifth Amendment.
“Because Plaintiffs are not legally compelled to participate in the Program— or in Medicare generally—they have not shown a strong likelihood of success on the merits of their due process claim,” the order stated.
National Infusion Center Association & PhRMA
READ MORE: HHS Posts Timeline for Medicare 2026 Drug Price Negotiations
The National Infusion Center Association (NICA), the Global Colon Cancer Association (GCCA), and the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a lawsuit together in June. The lawsuit includes claims that the program violates the Fifth and Eighth Amendments.
Additionally, the groups argued that the program violates the separation of powers and non-delegation principles in the constitution, as Congress has given broad authority to HHS to set prices in Medicare.
The groups filed a motion for summary judgment in August that bans HHS from implementing the program and enforcing the excise tax, among other requests.
Bristol Myers Squibb
Bristol Myers Squibb’s drug Eliquis was included in the first ten drugs available for negotiation. The drug company’s lawsuit alleges the program violates the First Amendment and the Takings Clause of the Fifth Amendment.
The company is seeking to block the government from enforcing the results of the price negotiations and a declaration that the provisions are unconstitutional.
The lawsuit alleges that since Bristol Myers Squibb’s products are “private property” under the Takings Clause, the government must pay “just compensation” to the owner.
“The Program uses the threat of ruinous excise taxes to coerce BMS and other targeted manufacturers to transfer their patented pharmaceutical products to Medicare beneficiaries,” the complaint stated.
Bristol Myers Squibb filed a motion for summary judgment in August, and the Department of Justice must file its opposition and cross-motion for summary judgment by October 16.
Other drug companies that have taken legal action against the drug price negotiation program include Janssen Pharmaceuticals, AstraZeneca Pharmaceuticals, and Boehringer Ingelheim Pharmaceuticals, Inc.
