A federal judge has made a significant ruling in favor of the Biden administration’s efforts to lower drug prices within the Medicare program, preserving a controversial initiative that aims to provide affordable medications for elderly Americans.
In a decision that carries substantial implications for the pharmaceutical industry, Judge Michael Newman of the Southern District of Ohio rejected a preliminary injunction sought by the Chamber of Commerce, one of the nation’s largest lobbying groups. The Chamber of Commerce had sought to halt the implementation of Medicare drug price negotiations before the October 1st deadline, which marked the cutoff for manufacturers of the initial 10 selected drugs to participate in these negotiations.
The Chamber had filed a lawsuit against the Biden administration in June, contending that the drug negotiations violated both the First and Fifth Amendments of the U.S. Constitution, as well as the principle of separation of powers. However, Judge Newman’s 28-page order stated, “As to Plaintiffs’ motion for a preliminary injunction, they have demonstrated neither a strong likelihood of success nor irreparable harm. Consequently, their request for immediate preliminary injunctive relief… is denied.”
While Judge Newman denied the preliminary injunction, he also declined to dismiss the lawsuit entirely. Instead, he has given the Chamber until October 13th to amend its complaint, seeking clarification on specific aspects of the case. The Biden administration has been granted until October 27th to renew its motion to dismiss the case. The final decision on standing issues will be determined after a short 60-day discovery period and any renewed motions to dismiss.
This ruling represents a setback for the pharmaceutical industry, which has expressed concerns that the Medicare drug price negotiations could negatively impact revenue growth, profits, and drug innovation. President Joe Biden’s Inflation Reduction Act, passed in a party-line vote last year, granted Medicare the authority to directly negotiate drug prices with manufacturers, marking a historic shift in the federal program’s nearly six-decade history.
The Chamber of Commerce, along with pharmaceutical giants like Merck and Johnson & Johnson, initiated multiple lawsuits in recent months challenging the constitutionality of these negotiations. However, the Chamber’s lawsuit was the only one to seek a preliminary injunction.
The Chamber’s argument centers on the claim that the program infringes upon drugmakers’ due process rights under the Fifth Amendment, as it allows the government to essentially dictate drug prices without providing procedural safeguards to ensure fair pricing. The Chamber cites the precedent set in the 2001 case Michigan Bell Telephone Co. v. Engler.
During a hearing earlier this month, Jeffrey Bucholtz, an attorney for the Chamber, expressed concern about the potential for “unfair” pricing, asserting that drugmakers would have to accept the government’s set prices or face excise taxes of up to 1,900% of U.S. sales of the drug.
However, lawyers for the Department of Justice argued that participation in the program was not obligatory. Drug manufacturers have the option to withdraw their voluntary participation in the Medicare and Medicaid programs if they disagree with the terms, according to attorney Brian Netter.
The legal battles over Medicare drug price negotiations are not limited to this case, as other lawsuits are currently scattered in federal courts across the United States. Legal experts suggest that the pharmaceutical industry hopes to obtain conflicting rulings from federal appellate courts, potentially fast-tracking the issue to the Supreme Court.
Medicare, which covers approximately 66 million Americans, is expected to save an estimated $98.5 billion over a decade through the drug price negotiations, according to the Congressional Budget Office. In August, the Biden administration unveiled the initial 10 drugs subject to negotiation, initiating a lengthy process set to conclude in August 2024. However, the reduced prices for these medications will not take effect until January 2026. Among the drugs selected for negotiation are blood thinners from Bristol-Myers Squibb and J&J, diabetes drugs from Merck and AstraZeneca, and a blood cancer drug from AbbVie, one of the companies represented by the Chamber of Commerce.
