Challenge to US Drug Price Negotiation Program Revived by Appeals Court

By Brendan Pierson

A U.S. appeals court has reinstated a lawsuit from healthcare and drug industry groups challenging the first U.S. law that mandates pharmaceutical companies negotiate drug prices with Medicare, which provides health coverage to 66 million individuals.

The ruling from the 5th U.S. Circuit Court of Appeals in New Orleans did not evaluate the case’s merits, which involves the Pharmaceutical Research and Manufacturers of America and other industry organizations. Instead, it concluded that a Texas judge was incorrect in dismissing the case in February on jurisdictional grounds.

This lawsuit is part of at least eight attempts to halt the drug price negotiation initiative. Thus far, none of these lawsuits have succeeded, and the government recently proceeded with the first round of price negotiations. Last month, it announced price reductions ranging from 38% to 79% on ten drugs, including Merck & Co’s diabetes medication Januvia and insulin products from Novo Nordisk, with these new prices set to take effect in 2026.

A spokesperson from PhRMA expressed satisfaction with the 5th Circuit’s decision, emphasizing the importance of allowing the lawsuit to be heard. Other plaintiffs, including the Global Colon Cancer Association and the National Infusion Center Association (NICA), also welcomed the ruling.

The U.S. Department of Health and Human Services, which manages the Medicare program, chose not to comment on the matter.

The drug industry and healthcare associations initiated the lawsuit last year in federal court in Austin, Texas, where NICA is located. The plaintiffs argued that the drug price negotiation program, a key component of President Joe Biden’s Inflation Reduction Act, infringes upon the U.S. Constitution by granting excessive authority to federal regulators and imposing heavy fines on companies that do not comply.

U.S. District Judge David Ezra had previously ruled that NICA could not pursue the case in court because its claims about potential financial losses tied to Medicare reimbursements were meant to be addressed with the HHS first, per federal Medicare law.

Without the participation of the Texas-based plaintiff, Judge Ezra determined he lacked jurisdiction to hear claims from the other groups.

However, the 5th Circuit panel, in a 2-1 decision, disagreed with this assessment. The panel stated that NICA’s claims were rooted in the Inflation Reduction Act rather than the Medicare law, thus allowing the case to proceed without first being directed to the HHS.

Circuit Judge Jennifer Walker Elrod authored the opinion, joined by Circuit Judges Kyle Duncan. Both judges were appointed by Republican presidents. Circuit Judge Irma Ramirez, appointed by Biden, dissented, aligning with Judge Ezra’s reasoning.