Drugmakers set strategy for legal fight against US pricing regulation

[May 09, 2023]  By Patrick Wingrove and Michael Erman

(Reuters) - Some of the world’s biggest drugmakers are laying legal groundwork to fight the U.S. plan to negotiate drug prices for its Medicare health coverage, including the argument that a ban against speaking about these talks violates constitutional rights, according to six industry sources.

The Biden Administration’s signature drug pricing reform, part of the Inflation Reduction Act (IRA), aims to save $25 billion through price negotiations by 2031 for Americans who pay more for medicines than any other country.

The pharmaceutical industry says the law, passed last year, will result in a loss of profits that will force them to pull back on developing groundbreaking new treatments.

The first ever Medicare drug price reduction process begins in September, when the Centers for Medicare and Medicaid Services(CMS) identifies its 10 most costly drugs. Following negotiations on that first wave of drugs, new prices will go into effect in 2026, when the agency could cut $4.8 billion in industry sales.

The blood thinner Eliquis from Bristol Myers Squibb and Pfizer, Pfizer's breast cancer drug Ibrance and AbbVie's leukemia treatment Imbruvica are likely to be among 10 big-selling medicines subject to the negotiations.

The government released its roadmap for these negotiations in March. Three industry lobbyists and lawyers said that unless Medicare changes its proposals before it finalizes them in July, drugmakers will likely file lawsuits arguing that the agency is not complying with Biden’s legislation nor the U.S. Constitution.

“I would be shocked if there wasn’t litigation,” said the head of government affairs at one big drugmaker, who was not authorized to discuss the issue.

Reuters has seen responses to CMS from five of the world's top drugmakers raising legal concerns with the law and the agency's proposed roadmap. They declined to be identified, and the letters have yet to be made public by the companies or the agency.

The Medicare program said it plans to publish the letters in July when it finalizes the guidance and regulations for implementing the law and it may make changes to any policies then.

“It's clear to me that a rollback of the provisions would be a real step backward for Medicare beneficiaries," said Jack Hoadley, a health policy professor at Georgetown University.

A pharmacist holds a bottle of the drug Eliquis, made by Pfizer Pharmaceuticals, at a pharmacy in Provo, Utah, U.S. January 9, 2020. REUTERS/George Frey

Former CMS head Andy Slavitt, who now works at a venture capital company focused on healthcare, said the Medicare agency would have consulted lawyers.

"The question isn't whether there's going to be litigation, the question is whether or not what you're doing is complying with the law and is defensible. And I think (the agency) is taking very careful, thoughtful efforts to do that," he said.

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Medicare’s guidance includes rules that forbid drugmakers from talking about the negotiations and imposes fines of $1 million a day for violations.

Those could be challenged under the U.S. Constitution’s First and Eighth Amendments protecting freedom of speech and against excessive fines, respectively, said three sources representing drugmakers.

One said the Medicare roadmap, which did not go through a formal process with proposed and final rules, could be challenged in court for being unlawful as well.

Six sources said factors involving whether a drug is considered eligible for negotiation may also contradict and unlawfully extend the law's provisions. In particular, they said the definition of a single-source drug sets too high a bar on whether a drug has competition.

Drug companies could file for emergency injunctions to delay government negotiations, according to one lawyer who represents multiple manufacturers. But lawsuits would represent more than just a delay tactic.

As it has done virtually every time the topic of drug price cuts or negotiations has been raised by U.S. politicians over the years, the industry argues it will pose a serious threat to its ability to develop innovative new medicines.

“Whether or not that is actually the case," said Juliette Cubanski at healthcare policy organization Kaiser Family Foundation, "litigation ... if successful, would notch another win for an industry that has enjoyed many years of success in blocking legislative proposals it opposes.”

(Reporting by Patrick Wingrove and Michael Erman; editing by Caroline Humer and Bill Berkrot)

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