Big Drug Companies VS. Lower Drug Prices: Breaking Down the Lawsuits

So, what is really happening with the IRA in the courts?

Drug prices in the United States are higher than in any other peer country. People are forced to choose between their medications and necessities like food or rent and are rationing, skipping, or not filling prescriptions all because of the cost! In 2021, Congress passed the Inflation Reduction Act (IRA), one of the most significant drug pricing laws to ever be passed in the United States. It reduced copays for insulin and capped out-of-pocket spending for older adults and people with disabilities, instituted rebates in Medicare for drugs whose prices rose too fast, and allowed Medicare to negotiate drug prices for the first time in history. This summer, CMS announced the list of the first ten drugs for which they will negotiate and began the process of gathering data from drug companies.

However, this program and its important benefits and savings are under attack. There are nine active lawsuits challenging the Medicare drug negotiation program. These lawsuits are being brought by drug companies like Merck and Johnson & Johnson whose drugs are among the first to be subject to negotiation, as well as the Ohio Chamber of Commerce, who represent drug companies.

Let’s break these lawsuits down, so that we can see these cases for what they really are: drug companies’ attempts to, once again, put their own greed ahead of the people who rely on their drugs to stay alive and healthy.

What are the legal arguments being made against the price negotiation provision?

Many of these lawsuits hinge their arguments on claims of violation of the First, Fifth, and/or Eighth Amendments. Specifically, drug companies claim that the government is compelling them to “speak” through participation in the negotiations, that instituting the negotiated prices will result in the government “taking” their property without just compensation, and that the excise tax (the tax Medicare would impose should a drug company decline to participate in the program or refuse to honor the negotiated price) would be an “excessive fine” against the companies.

The indisputable fact, however, is that the negotiation process and the Medicare program in its entirety are voluntary. Additionally, these constitutional arguments are not a novel approach as there is strong precedent from previous health care legal challenges and judges have dismissed similar claims in previous health care lawsuits.

However, any of the judges in the nine cases could view these as valid claims and pose a real threat to the negotiation process and getting fair, affordable prices to people who need them.

What is the timeline and potential ramifications for these lawsuits?

Unfortunately, the legal process takes time to play out– and these suits could wind their way through the judicial system ultimately ending up at the U.S. Supreme Court. Should any of the lawsuits move forward, there is a threat that the negotiation program gets delayed, paused, or cancelled altogether. It’s also possible that the companies suing could be exempt from participation, meaning their drug would no longer be up for negotiation, allowing them to continue selling at wildly inflated prices. This could have severe consequences for millions of people in our country who are waiting for access to drugs that they currently cannot afford.

Briefings for the lawsuits are ongoing but we could expect to see early decisions as soon as mid-2024. However, a recent ruling in the Dayton Area Chamber of Commerce et al. v. Becerra et al case provides new insight into how some of the lawsuits might be handled. The judge in that case blocked a request for an injunction, which, if granted would have halted progress on the entire negotiation program. The injunction request focused mostly on the due process clause, a claim that said the government cannot “take” products at below market rate without constitutional safeguards like notice and rulemaking or judicial oversight. Even though the is an early ruling — and not a final decision — it is the first major win for the negotiation program and the people fighting for affordable access to medications.

Were these legal challenges anticipated with drug negotiation?

Let’s be clear – these lawsuits are not unexpected. Indeed, they are part of the same playbook used when the Affordable Care Act passed. That law, which provides health care access and protections to millions of Americans, was the subject of many lawsuits — several of which ended up at the Supreme Court. The IRA and its Medicare drug negotiation program are similarly transformational, and it is taking on abuses in the health care system acted upon and upheld by some of the sector’s wealthiest and well-resourced actors: drug companies and their lobbyists. In many ways, these lawsuits just represent a continuation of the same arguments these same actors made when the law was being written and passed in Congress. They have only moved legislative fights to the judicial arena.

The Biden administration is expected to continue to defend the IRA and its monumental benefits, and advocates will continue to fight against these lawsuits with tactics like amicus briefs.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) continues to move forward with implementation. They have already received agreements to participate from all drug companies that manufacture the first ten drugs up for negotiation and are in the next stages of data gathering and formulating an initial price offer.

While we cannot predict an outcome to any of these lawsuits, we do know that the only people drug companies are trying to help with these suits are themselves. Drug companies are placing themselves in direct opposition to the very people they claim to serve – all the individuals and their families who rely on life-saving and sustaining medications and who are currently unable to afford them due to drug company greed.