AstraZeneca to Fight Medicare Drug Price Plan in Federal Court

A major drugmaker will argue Wednesday that the government price-setting program created to slash prescription drug costs was unlawfully implemented.

AstraZeneca PLC and the US Department of Justice will face off in the US District Court for the District of Delaware over the historic Medicare Drug Price Negotiation Program, which was formed under President Joe Biden’s 2022 Inflation Reduction Act to allow the government to set prices on some of the costliest drugs Medicare covers.

Among the nine ongoing lawsuits filed against the Biden administration, AstraZeneca’s approach to striking down the pricing scheme poses unique arguments compared to the challenges that allege constitutional violations.

The drugmaker’s case mainly rests on claims that the program’s implementation violates the Administrative Procedure Act, taking a swing at implementation guidance and definitions from the Centers for Medicare & Medicaid Services.

“The focus of their lawsuit is not on constitutional claims, but instead on choices that the Biden administration has made implementing the law,” said Nicholas Bagley, a professor at the University of Michigan Law School focused on administrative and health law.

“They’re pretty in the weeds, but they’re saying that those choices are improper, and therefore HHS has to go back to the drawing board and think about how it’s going to implement this law,” Bagley said.

AstraZeneca’s Farxiga, used to treat Type 2 diabetes, was one of the 10 drugs selected in the first negotiation round.

Procedural Challenge

AstraZeneca alleges that the CMS’s 2023 negotiation program guidance violated the APA by overriding the Medicare statute’s definition of “qualifying single source drug,” so that the term impermissibly includes two different drugs approved at different times, and by adding a new “bona fide marketing” requirement that sweeps drugs into the selection process even when they have generic competition, keeping them subject to the discounted price longer.

A qualifying single source drug under the program guidance is a brand-name drug for which at least seven years have passed since its FDA approval or licensure as of the date the list of selected drugs is published, or 11 years for biologics, and for which there is no generic or biosimilar competition.

The manufacturer also claims that the program’s “watershed expansion of federal regulatory authority” violates due process, in addition to the program not being a negotiation, and the suit deserves judicial review.

“Finally, to be very clear: There is nothing voluntary about any of this. The only ‘choice’ available to a manufacturer wishing to avoid draconian penalties under the Program is to withdraw all of its drug products from both Medicare and Medicaid,” AstraZeneca said in its last filing.

But the CMS has repeatedly told AstraZeneca that it can withdraw from the program whenever it wants, citing the IRA’s text and the CMS guidance. The agency also claims the drugmaker lacks standing on APA claims because Congress precluded judicial review on those claims.

The agency’s response to AstraZeneca’s claims on harms for its future drugs is that the “guidance only governs the first negotiation cycle.”

Both parties in their briefings have pointed to the only other case that’s been partially ruled on so far in regard to the price setting program: Dayton Area Chamber of Commerce v. Becerra.

The US District Court for the Southern District of Ohio in that case rejected the Chamber’s preliminary injunction and said it hadn’t demonstrated a “strong likelihood” of succeeding on its claim that the negotiation provisions violate the due process clause of the Fifth Amendment. The Chamber also failed to show it would suffer “irreparable harm” without a court-ordered halt to the negotiation timeline.

The CMS uses the case as support for its claim that AstraZeneca’s due process arguments are meritless. The manufacturer, though, said the “Ohio case is not the universal solvent the Government thinks it is.”

Target Decision Date

Chief District Judge Colm F. Connolly’s target decision date is on or before March 1, according to a September 2023 filing.

It’s possible that other district courts could rule in other drug price negotiation cases after Connolly’s order, given that the majority of the lawsuits filed against the Biden administration have finished their briefing schedule or are nearing the end.

The drugmaker’s challenge is one of many lawsuits filed among different district courts alleging the program is unconstitutional. Other drugmakers like Johnson & Johnson, Bristol-Myers Squibb Co., and Merck & Co., have made constitutional claims such as the program violating the First Amendment, Fifth Amendment takings clause, Eighth Amendment excessive fines clause, and separation of powers doctrine of the Constitution.

Boehringer Ingelheim and Novo Nordisk A/S have also made Administrative Procedure Act claims.

Pushback from the pharmaceutical industry so far signals that the challenges could reach the nation’s high court.

“It’s really an interesting question of how far the judicial preemption clause goes and whether the court says, ‘well, it’s very clear that Congress says this is not up to the courts and that CMS should be granted very wide latitude,’” said Carmel Shachar, professor of health law and policy at Harvard Law School.

“Or whether they say, ‘no, we’re not supposed to get into the particular number of negotiations, like rationale, but we’re still in the business of evaluating the choices and actions of an administrative agency,’” Shachar added.

The case is AstraZeneca Pharm. LP v. Becerra, D. Del., No. 1:23-cv-00931, oral argument 1/31/24.