A federal judge in Texas on Monday dismissed a lawsuit brought by the industry group PhRMA challenging Medicare's new drug price negotiation program. It was the first time a court has thrown out a lawsuit to overturn the program passed as part of the Inflation Reduction Act.

The legislation 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.

PhRMA sued the administration last June, and the National Infusion Center Association and the Global Colon Cancer Association joined the lawsuit. The plaintiffs argued that the Inflation Reduction Act delegated too much power to the Department of Health and Human Services and violated drug companies' due process. The Department of Justice countered that the infusion association, the only plaintiff based in Texas, lacked standing because it doesn't manufacture or sell prescription drugs that could be subject to negotiations.