Major Drugmakers to Team Up in Court Against Price Negotiations

Four leading drugmakers seeking to scuttle Medicare’s drug pricing program will have their day in federal court Thursday to defend a gamut of legal challenges against the scheme.

Bristol Myers Squibb Co., Johnson & Johnson, Novartis AG, and Novo Nordisk A/S were given the green light from Judge Zahid N. Quraishi of the US District Court for the District of New Jersey to present their arguments in one hearing among the four separate lawsuits before the court.

The four-and-a-half hour long meeting will lay out the legal battle between the pharmaceutical industry and the Department of Health and Human Services over the Medicare Drug Price Negotiation Program—a plan created under the Inflation Reduction Act to slash the costs of prescription drugs Medicare spends the most on.

Bristol Myers Squibb’s Eliquis, Johnson & Johnson’s Xarelto, Novartis’ Entresto, and Novo Nordisk’s Fiasp/NovoLog were selected for negotiated prices in the first program round.

The four manufacturers have made an array of claims alleging the plan violates the US Constitution and was unlawfully implemented on procedural grounds. Federal judges in similar cases have shown doubt as recently as last week to industry claims. But despite those losses, this next hearing gives drugmakers another shot to defend their case that the program violates their constitutional and property rights.

“They’re trying to find anything that will stick on an individual rights or structural basis to potentially succeed through litigation in halting the program,” said James G. Hodge, a health law professor at Arizona State University’s Sandra Day O’Connor College of Law.

“If they get even one judge in one jurisdiction to actually see something there, they may be able to take that and run with it. One claim, one judge, one injunction, and they could be delayed from having to negotiate these multibillion-dollar deals,” Hodge said.

Constitutional, Procedural Attacks

Among the four cases, drugmakers argue the program violates compelled speech under the First Amendment, the Fifth Amendment takings clause and due process, and excessive fines under the Eighth Amendment.

In addition to the constitutional claims, Novo Nordisk alleges the negotiations violate the separation of powers doctrine and the Administrative Procedure Act.

Despite the various arguments, there’s an “overlapping nature of the claims asserted and certain common defenses to those claims,” attorneys of the manufacturers said in an oral argument proposal to Quraishi.

All manufacturers generally agree that the program will harm their bottom line and hinder research and development on current and future products.

But the companies “seem to have taken a ‘kitchen sink’ approach” in challenging the Centers for Medicare & Medicaid Services’ authority to negotiate prices, said Andrew Twinamatsiko, director of the Health Policy and the Law Initiative at Georgetown University’s O’Neill Institute.

“It seems they are throwing everything to the wall to see what sticks,” Twinamatsiko said.

The government has maintained that choosing to sell drugs to Medicare, like participating in other federal health programs, is voluntary. Drug companies have the option of not selling their drugs to Medicare, the Department of Justice has argued on behalf of the CMS.

The DOJ has relied on the merits to refute arguments and asked the court to rule in its favor on some claims.

The litigation right now is a “bit of a who-will-blink-first standoff,” said Theresa C. Carnegie, a member at Mintz Levin, in regards to what happens if manufacturers don’t comply with the program.

Drugmakers can withdraw from the negotiation at any point, but forfeit participation in all other federal health programs including Medicare and Medicaid. An excise tax, which Novartis argues against in its lawsuit, is also on the line if companies refuse to participate in the negotiations or comply with the maximum fair price set by Medicare.

“It really is not a viable option for the manufacturers to not sell their products to Medicare and the government would certainly not want that outcome in terms of patient access to medications,” Carnegie said.

All the drugmakers participating in the first negotiation cycle responded with counteroffers of the inital maximum fair price offered by the CMS, according the agency.

Weight on Quraishi

Four of the seven current lawsuits are in the hands of Quraishi.

The Biden appointee, who has been on the bench for three years, will have a say on whether the four manufacturers have proven their point that the program participation forces them to forgo constitutionally protected rights.

Quraishi will also make his decision in the context of similar rulings that have already come down against the drugmakers.

AstraZeneca PLC suffered a setback on March 1, when Chief Judge Colm F. Connolly of the US District Court for the District of Delaware ruled that the manufacturer’s due process claim “fails as a matter of law,” and that the court lacks jurisdiction for the manufacturer’s Administrative Procedures Acts claims.

Connolly also struck down claims about the program being involuntary when he wrote that “no one” is “entitled to sell the Government drugs at prices the Government won’t agree to pay.”

Ahead of Thursday’s oral argument, the DOJ cited AstraZeneca’s loss in supplemental authorities in all four cases.

A federal judge in Ohio partially ruled in a case involving the US Chamber of Commerce and affiliates that the plaintiffs hadn’t demonstrated a “strong likelihood” of succeeding on its claim that the program violates due process. The judge also blocked the Chamber’s motion for preliminary injunction that would have halted the program.

Similar claims were brought in a case by the Pharmaceutical Research and Manufacturers of America, but a federal judge in Texas tossed the suit Feb 12. due to lack of jurisdiction.

“This is not small ticket stuff here,” Hodge said. “These judges know the ramifications of their actions and these companies know what’s at stake.”

Similar suits against the program brought by manufacturers and industry groups are pending for Merck & Co., Boehringer Ingelheim, and the Dayton Area Chamber of Commerce in Ohio.

The cases are:

• Bristol Myers Squibb Company v. Becerra, D.N.J., No. 3:23-cv-03335
• Janssen Pharmaceuticals, Inc. v. Becerra, D.N.J., No. 3:23-cv-03818
• Novartis Pharmaceuticals Corporation v. Becerra, D.N.J., No. 3:23-cv-14221
• Novo Nordisk Inc. et al v, Becerra, D.N.J., No. 3:23-cv-20814.