Drugmakers Urge Appeals Court to Revive Challenge to US Drug Price Negotiation Program

In a pivotal legal battle, lawyers representing pharmaceutical giants AstraZeneca, Bristol Myers Squibb, and Johnson & Johnson’s Janssen division are urging a federal appeals court in Philadelphia to revive their lawsuits against a groundbreaking U.S. law that mandates pharmaceutical companies to negotiate drug prices with the government. This program, part of President Joe Biden’s Inflation Reduction Act, aims to lower prescription drug prices for Medicare beneficiaries, a move projected to save Medicare about $6 billion in the initial year.

The First-Ever Price Negotiation Law

For the first time, pharmaceutical companies are required to negotiate the prices of certain drugs covered by Medicare, which serves around 66 million people in the United States. Among the ten drugs selected for initial negotiations are AstraZeneca’s diabetes treatment Farxiga, Bristol Myers’ blood thinner Eliquis, and Janssen’s Xarelto, also a blood thinner. As part of the law, these drugs are facing price reductions ranging from 56% to 68%, effective in 2026. These large cuts have drawn fierce opposition from the affected companies, prompting them to challenge the law in court.

The Legal Challenges

The pharmaceutical companies assert that the negotiation program constitutes a “taking” of their property without just compensation, a violation of the U.S. Constitution. Lower courts in Delaware and New Jersey dismissed the companies’ initial challenges, but the appeals court proceedings represent a critical moment in this ongoing legal struggle. Yaakov Roth, representing Bristol Myers, emphasized to the three-judge panel of the 3rd U.S. Circuit Court of Appeals that compliance with the law is not optional. He characterized the situation as akin to a “gun to the head,” where companies that refuse to enter negotiations face immense fines or a complete exit from the Medicare market.

The Government’s Position

Catherine Padhi, a lawyer for the U.S. Department of Justice, defended the program, asserting that the government has the right to leverage its purchasing power to achieve beneficial outcomes. She stated that the government is presenting beneficiaries with a favorable deal and legally justifiable under its authority. On the other hand, Kevin King, representing Janssen, introduced another argument: that the law infringes on the companies’ First Amendment rights by compelling them to accept a “maximum fair price,” even if they disagree with its fairness.

The Court’s Deliberation

During the court proceedings, the panel comprising Circuit Judges Thomas Hardiman, Peter Phipps, and Arianna Freeman did not indicate a clear stance on the matter. Notably, Judge Hardiman articulated that the program could be viewed as the government utilizing its leverage to compel drugmakers to relinquish their property rights. Yet, he also noted that the drugmakers appeared to want to “have their cake and eat it too,” by enjoying the considerable purchasing power of the government while maintaining prices reflective of a free market. He acknowledged that the intention behind the program—curbing the federal budget deficit—is commendable.

The Broader Implications

This legal battle does not exist in isolation; drugmakers have struggled to overturn the program through several lawsuits. Earlier this year, the 5th U.S. Circuit Court of Appeals in Texas brought some optimism to the pharmaceutical industry by reviving a lawsuit from the Pharmaceutical Research and Manufacturers of America (PhRMA), the largest lobbying group for the drug industry. The outcome of these legal challenges could significantly impact how drug pricing is regulated in the U.S. and could set a precedent for future pharmaceutical negotiations.

Conclusion

The ongoing legal challenges to the U.S. drug price negotiation program illustrate the tension between pharmaceutical companies seeking to protect their profits and the government’s desire to provide affordable healthcare solutions to millions of Americans. As the appeals process continues, the implications for drug pricing strategies, Medicare beneficiaries, and the overall healthcare landscape remain critical focal points in this evolving saga.