Judge tosses PhRMA lawsuit over Medicare drug price negotiations

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.

Judge David Alan Ezra of the U.S. District Court for the Western District of Texas sided with the plaintiffs. “With NICA dismissed, no defendant would reside in this district, and nothing suggests that a substantial part of the events or omissions giving rise to the claim occurred in this district,” he wrote.

Although the administration welcomed the ruling, it was only the latest salvo in what is expected to be a long-running legal battle over price negotiation. “We are disappointed with the court’s decision, which does not address the merits of our lawsuit, and we are weighing our next legal steps,” PhRMA spokesperson Nicole Longo told The Hill.

Legal challenges could stretch for years, because a number of major drugmakers, including Merck, Bristol Myers Squibb and Johnson & Johnson, also have filed lawsuits over the constitutionality of Medicare’s new powers. The first round of drug negotiations is ongoing, and last month, a judge heard oral arguments in a challenge brought by AstraZeneca.

Because the lawsuit was dismissed without prejudice, it could be brought up again. PhRMA also could appeal to the 5^th U.S. Circuit Court of Appeals. However, if it prevailed, it likely would have to go back to the district court to re-litigate its arguments, Zachary Baron, director of the Health Policy and the Law Initiative at Georgetown University’s O’Neill Institute, told Axios.

Related: Pharma group files 4th lawsuit challenging Medicare’s drug price negotiation plan

The federal government sent out its initial offer to drug companies earlier this month, and although negotiations will end in August, the prices won’t take effect until 2026.