Pharmaceutical group's lawsuit over Medicare drug price program dismissed

[February 13, 2024]  By Nate Raymond

(Reuters) - A federal judge on Monday dismissed a lawsuit by a major pharmaceutical industry trade association challenging a new program that allows Medicare to negotiate prices with drug companies for selected costly drugs.

U.S. District Judge David Ezra in Austin, Texas, sided with President Joe Biden's administration in dismissing a lawsuit by the Pharmaceutical Research and Manufacturers of America (PhRMA) and two other groups that argued the program was unconstitutional.

"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," Nicole Longo, a PhRMA spokesperson, said in a statement.

The ruling marked another victory for the administration in its defense of the negotiation program, one of Biden's signature initiatives and part of the Inflation Reduction Act that the Democratic president signed into law in 2022.

The program aims to save $25 billion annually by 2031 by requiring drugmakers to negotiate the prices of selected expensive drugs with the U.S. Centers for Medicare and Medicaid Service (CMS), which oversees Medicare.

Drugmakers that refuse to participate must either pay heavy fines or withdraw altogether from Medicare, which covers 66 million Americans mostly aged 65 and older and accounts for a large share of U.S. prescription drug spending.

In a lawsuit filed in June, PhRMA, the Global Colon Cancer Association and the National Infusion Center Association (NICA) argued the penalties violated the U.S. Constitution's Eight Amendment protections against excessive fines.

Pharmaceutical tablets and capsules are arranged in the shape of a U.S. dollar sign on a table in this picture illustration taken in Ljubljana August 20, 2014. REUTERS/Srdjan Zivulovic/File Photo

It also argued the law impermissibly delegated legislative power to the agency and violated companies' due process rights.

The lawsuit was filed in NICA's home state of Texas, and Ezra in his 14-page ruling said it could only move forward if NICA's claims were proper.

But Ezra said the court lacked jurisdiction to hear its claims because they arose under the Medicare Act and could only be heard by a court following an administrative review by the agency.

Several other lawsuits have been filed by major drug makers and groups including Johnson & Johnson, Merck & Co and AstraZeneca. A judge recently heard arguments in AstraZeneca's case.

Another federal judge in Ohio in September refused to block the law in a case brought by the U.S. Chamber of Commerce, the nation's largest business lobbying group. The cases are expected to reach federal appeals courts and possibly the U.S. Supreme Court.

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