Challenge to US Drug Price Negotiation Program Revived by Appeals Court

By Brendan Pierson

A U.S. appeals court has reinstated a lawsuit filed by healthcare and pharmaceutical industry groups challenging the inaugural U.S. law mandating pharmaceutical companies to negotiate drug prices with Medicare, the government health program serving 66 million individuals.

The ruling from the 5th U.S. Circuit Court of Appeals in New Orleans did not evaluate the substance of the case, which was initiated by the Pharmaceutical Research and Manufacturers of America (PhRMA) and other parties. Instead, it concluded that a Texas judge had erred in dismissing the lawsuit earlier this year, citing a lack of jurisdiction.

This lawsuit is one of several ongoing legal challenges against the program, with at least seven other lawsuits also attempting to impede it. To date, none have succeeded, allowing initial price negotiations to proceed. Recently, the government announced significant price reductions ranging from 38% to 79% for ten drugs, including Merck’s diabetes medication Januvia and insulin products from Novo Nordisk. The newly negotiated prices will be implemented in 2026.

A spokesperson for PhRMA expressed satisfaction with the 5th Circuit’s decision, stating that the merits of their lawsuit regarding the drug pricing provisions of the Inflation Reduction Act should be reviewed. The other plaintiffs—Global Colon Cancer Association and the National Infusion Center Association (NICA)—also commended the court’s ruling.

The U.S. Department of Health and Human Services (HHS), responsible for overseeing this program, opted not to provide any comments on the matter.

Last year, the drug industry and healthcare organizations initiated their lawsuit in federal court in Austin, Texas, the home base for NICA. They contended that the price negotiation initiative, a key policy of President Joe Biden’s administration included in the Inflation Reduction Act, infringed upon the U.S. Constitution by granting excessive authority to federal regulators and imposing harsh penalties on companies opting out of negotiations.

In February, U.S. District Judge David Ezra ruled that NICA, which claimed potential financial losses due to Medicare reimbursements linked to drug prices, could not proceed with the case in court because disputes concerning reimbursement had to be referred to HHS first, as dictated by federal Medicare law. The judge further asserted that without Texas-based NICA, he lacked jurisdiction to hear the claims of the other organizations.

However, a 2-1 decision from the 5th Circuit panel on Friday disagreed with this assessment. The panel determined that NICA’s claims arose from the Inflation Reduction Act rather than the Medicare law, thus eliminating the requirement to present the case before HHS.

Circuit Judge Jennifer Walker Elrod authored the opinion and was joined by Circuit Judge Kyle Duncan, both of whom were appointed by Republican presidents. Circuit Judge Irma Ramirez, nominated by Biden, dissented, aligning with Judge Ezra’s rationale.