A pharmacologist displays a bottle of the medication Eliquis, produced by Pfizer Pharmaceuticals, at a pharmacy in Provo, Utah, on January 9, 2020.
George Frey | Reuters
On Friday, a federal judge made a significant ruling by refusing to stop the Biden administration from implementing Medicare drug price negotiations. This decision supports a controversial strategy aimed at making expensive medications more affordable for older Americans, a demographic that often struggles with healthcare costs.
Judge Michael Newman of the Southern District of Ohio issued a ruling that dismissed an initial injunction sought by the Chamber of Commerce, which is among the largest lobbying organizations in the country. This injunction aimed to prevent price negotiations from proceeding before the critical deadline of October 1.
The October 1 deadline is crucial, as it marks the date by which manufacturers of the first ten drugs selected for negotiations must agree to participate in these discussions.
Despite rejecting the Chamber’s request, Newman, who was appointed by former President Donald Trump, also declined the Biden administration’s motion to dismiss the case entirely. Instead, he instructed the Chamber to revise its complaint by October 13 to clarify certain details pertinent to the case.
Furthermore, Newman granted the Biden administration until October 27 to renew its motion to dismiss the case. He stated that a final determination regarding standing issues would be made after a brief 60-day discovery period, which will facilitate a comprehensive examination of the facts and arguments presented.
This ruling represents a significant setback for the pharmaceutical industry, which perceives the negotiations as a threat to its revenue growth, profitability, and the overall development of new medications.
President Joe Biden’s Inflation Reduction Act, which passed last year along party lines, empowers Medicare to negotiate drug prices directly with manufacturers for the first time in the program’s nearly 60-year history, marking a substantial shift in healthcare policy.
The Chamber of Commerce, representing various companies in the pharmaceutical sector, along with drug manufacturers such as Merck and Johnson & Johnson, has filed at least eight separate lawsuits in recent months, arguing that the negotiations are unconstitutional. However, the Chamber’s lawsuit was the only one seeking a preliminary injunction.
Michael Newman, U.S. District Court Judge Ohio
Source: U.S. District Court
The legal action filed by the Chamber argues that the negotiation program violates drug manufacturers’ due process rights under the Fifth Amendment by granting the federal government the power to effectively set prices for their medications. This claim underscores the tension between public health initiatives and the pharmaceutical industry’s profit motives.
The Chamber contends that a precedent established by an appeals court mandates that when the government sets prices, it must provide detailed safeguards to ensure that companies receive a fair price and a reasonable return on investment. This precedent originates from the 2001 case of Michigan Bell Telephone Co. v. Engler, according to the Chamber’s arguments.
They argue that the Medicare negotiations lack these essential safeguards and impose price caps that fall significantly below the market value of the drugs, which could threaten the sustainability of drug development.
“There is a very, very high risk, maybe even a guarantee, but certainly a very, very high risk, that this regime will result in prices that are unfair,” stated Jeffrey Bucholtz, a lawyer representing the Chamber, during a hearing earlier this month.
He further emphasized that drug manufacturers face a dilemma: they either accept the prices set by the government or risk facing an excise tax of up to 1,900% of U.S. sales for the drug in question, a punitive measure that could severely impact their financial viability.
In contrast, lawyers for the Department of Justice (DOJ) argued during the hearing that participation in the program is not mandatory. They asserted that drug manufacturers have options beyond the two choices presented: they can withdraw their voluntary participation in the Medicare and Medicaid programs entirely, a step that would allow them to avoid the prescribed pricing structure.
“The measure of relief here is for manufacturers to decide whether they want to remain in the program under the terms that are on offer,” stated lawyer Brian Netter. “If they choose not to, that is entirely within their prerogative, highlighting the voluntary nature of the program.”
Other lawsuits related to this issue are currently being processed in federal courts across the United States. Legal experts believe that the pharmaceutical industry aims to achieve conflicting rulings from federal appellate courts, which could expedite the case’s journey to the Supreme Court, ultimately seeking a definitive resolution.
According to research from the health policy organization KFF, Medicare now covers approximately 66 million individuals in the U.S. The drug price negotiations are projected to save the insurance program an estimated $98.5 billion over the next decade, as reported by the Congressional Budget Office.
In August, the Biden administration announced the ten drugs that will be subject to the first round of price negotiations, officially initiating a comprehensive negotiation process that is expected to conclude in August 2024. However, the reduced prices resulting from these negotiations will not take effect until January 2026.
This list includes blood thinners from Bristol-Myers Squibb and J&J, as well as diabetes medications from Merck and AstraZeneca. It also includes a blood cancer treatment from AbbVie, one of the companies represented by the Chamber of Commerce.
