Pharma group files 4th lawsuit challenging Medicare’s drug price negotiation plan
Drug negotiation with manufacturers is government price fixing and is unconstitutional, says the Pharmaceutical Research and Manufacturers of America.
The Pharmaceutical Research and Manufacturers of America has joined two other associations in a federal lawsuit challenging the price-setting provisions of the Inflation Reduction Act.
PhRMA, along with the Global Colon Cancer Association and the National Infusion Center Association, assert that the IRA is unconstitutional, including what the groups call an excise tax threat for noncompliance to agree to prices set by the federal government. The tax can reach as high as 1,900% of a manufacturer’s total U.S. revenues for a drug, they said. “It is no negotiation at all,” the lawsuit said. “It is a government mandate disguised as negotiation. And it is unconstitutional, on several grounds.”
The PhRMA lawsuit is the fourth challenge to price-setting provisions of the Inflation Reduction Act that instruct the Centers for Medicare and Medicaid Services overseeing Medicare to start negotiating prices for a handful of high cost drugs each year starting in 2026. Previous lawsuits have been filed by Merck, the U.S. Chamber of Commerce and Bristol Myers Squibb.
The PhRMA lawsuit, filed last week in U.S. District Court for the Western District of Texas, named as defendants the U.S. Department of Health and Human Services and Secretary Xavier Becerra and the CMS and Administrator Chiquita Brooks-LaSure. The lawsuit seeks a permanent injunction against enforcement of the drug pricing program and excise tax.
Related: Merck sues HHS and CMS, calling plan to negotiate drug prices ‘extortion’
The IRA authorized Medicare to directly negotiate prices for select medications. Part B drugs may be eligible to be selected for negotiation starting in 2026 for prices effective in 2028. Manufacturers are required to pay a rebate to Medicare if a drug’s price increase exceeds the rate of inflation. CMA said it intends to send the first invoices to manufacturers in 2025 for the rebates owed to Medicare in 2023 and 2024.
During a recent call with J.P. Morgan analysts, the CEOs of PhRMA, Eli Lilly and Sage Therapeutics said the IRA is destabilizing investment in innovation to the extent that it would create patient “winners and losers” for drug access.
Medicare traditionally encouraged pharmaceutical innovation through market-based mechanisms, the lawsuit said. Congress sought to ensure that Medicare reimbursed the costs of these drugs at rates based on prices negotiated in real market transactions. Instead, Congress established a system of price controls.
“It’s no surprise that big pharma wants to stop Medicare from negotiating lower drug prices on behalf of American seniors,” said Sen. Ron Wyden, D-Ore., chair of the Senate Finance Committee. “I expect the Biden administration to vigorously defend Medicare’s bargaining power so seniors will see the lower drug prices they expect.”
The lawsuit countered that the IRA upends the market-based system that encouraged innovation and instead established a system of price controls. “Had Congress made clear that it was mandating price controls, the resulting drug shortages, rationing and declining innovation would be clearly attributable to the elected officials who supported the law,” the lawsuit said.