In the latest in a string of setbacks in biopharma’s efforts to fight Medicare drug price negotiations, a lawsuit from the industry’s top lobbying group has been rejected at the appeals level.
On Wednesday, the U.S. Court of Appeals for the Fifth Circuit affirmed (PDF) a previous ruling in district court rebuffing PhRMA and its co-plaintiffs’ arguments, which challenge the constitutionality of the drug price negotiations baked into 2022’s Inflation Reduction Act (IRA).
In a rejection of one of PhRMA and multiple other drugmakers’ core contentions against the program, Judge Leslie Southwick wrote in an opinion this week that “we conclude that manufacturers lack a protected interest in selling to Medicare beneficiaries at a preferred price because participation in Medicare and Medicaid, and thus in the Program, is voluntary.”
The notion that companies are compelled to take part in what are ostensibly voluntary price talks has been a rallying cry across the industry’s legal challenges to the IRA, though so far, it has failed to carry much water in the courts.
If companies cannot reach an agreement with the Centers for Medicare and Medicaid Services (CMS) on a maximum fair price on a drug tapped for the program within a stipulated timeframe, the manufacturer may be subject to an excise tax levied by the IRS. Meanwhile, those who choose not to participate could remove their products from Medicare and Medicaid coverage to avoid the tax—an option many pharmas have argued isn’t much of a choice at all.
“We agree with the Second Circuit, which rejected another IRA due process challenge on the grounds that a ‘company suffers no deprivation of its property interests by voluntarily submitting to a price-regulated government program,’” Southwick wrote in the opinion.
She acknowledged that the “financial importance to manufacturers of their drugs being available through the Medicare and Medicaid programs is clear,” adding that the Fifth Circuit nevertheless believes that participation in the programs “should not be considered involuntary because of that importance,” as economic hardship is not equivalent to legal compulsion.
PhRMA, for its part, is “reviewing the decision and all options,” a spokesperson for the trade association told Fierce over email.
The group brought its challenge against the IRA pricing provisions back in 2023, filing the suit alongside the National Infusion Center Association (NICA) and the Global Colon Cancer Association (GCCA).
At the time, the plaintiffs asserted that the Medicare price negotiations included in the IRA lacked requirements for checks and balances via public feedback and cut off administrative and judicial review, potentially violating the Constitution’s separation of powers and due process clauses.
Moreover, they asserted that the “extreme” excise tax placed on those who fail to reach a negotiated price in time is “disproportionate to the purported offense,” which in turn would make it an excessive fine in violation of the Eighth Amendment.
Large drugmakers are more or less unified in opposition to the price negotiation program, though efforts to challenge it in court have largely been unsuccessful, even amid efforts to relitigate previous losses.
Just this week, the U.S. Court of Appeals for the Third Circuit in Washington, D.C., also pushed back claims from Merck & Co. that the price negotiations violate the First and Fifth Amendments.
Days before that, a federal court in Maryland dismissed a challenge from AstraZeneca, which contended that the government had lumped too many of its drugs together to reach a benchmark making them eligible for inclusion in the price negotiation program.
Generics and innovative medicines hybrid Teva, meanwhile, scored a rare partial win in its IRA challenge last week, when the Washington D.C., appeals court sent a previous ruling back to district court for further review. Teva’s argument in that particular challenge hits back against CMS’ requirement that a generic drug be genuinely marketed before its brand-name reference product is excluded from negotiation.