Challenge to US drug price negotiation program revived by appeals court

A U.S. appeals court revived a lawsuit on Friday by healthcare and drug industry groups challenging the first-ever U.S. law requiring pharmaceutical companies to negotiate drug prices with the government's Medicare health insurance program that covers 66 million people.

The decision from the New Orleans-based 5th U.S. Circuit Court of Appeals did not address the merits of the case, which was brought by the nation's largest drug industry lobbying group, Pharmaceutical Research and Manufacturers of America and others. Instead, the court found only that a Texas judge was wrong to dismiss the case in February on the grounds that he did not have jurisdiction to hear it.

The case is one of at least eight lawsuits seeking to block the program. So far, none has been successful, and the first round of price negotiations was allowed to go forward, with the government last month announcing negotiated price cuts ranging from 79% to 38% on 10 drugs, including Merck & Co's diabetes drug Januvia and Novo Nordisk's insulin products. The new prices go into effect in 2026.

"We are pleased the 5th Circuit agreed that the merits of our lawsuit challenging the (Inflation Reduction Act's) drug pricing provisions should be heard," a PhRMA spokesperson said in a statement. The other two plaintiffs - the Global Colon Cancer Association and the National Infusion Center Association (NICA) - also praised the decision.

The U.S. Department of Health and Human Services, which oversees the program, declined to comment.

The drug industry and healthcare groups sued the government last year in federal court in Austin, Texas, where NICA is based. They claimed that the drug price negotiation program, a signature initiative of Democratic President Joe Biden passed as part of the Inflation Reduction Act, violated the U.S. Constitution by giving too much power to federal regulators and imposing excessive fines on companies that refuse to participate.

U.S. District Judge David Ezra ruled in February that NICA, which claimed its infusion center members would lose money because their Medicare reimbursement is tied to the price of the drugs they administer, could not bring the case in court because the federal Medicare law required it to bring disputes over reimbursement to the HHS first.

The judge added that without the Texas-based plaintiff, he had no jurisdiction to hear the other groups' claims.

But the 2-1 5th Circuit panel on Friday disagreed and said NICA's claims stemmed from the Inflation Reduction Act, not the Medicare law, meaning that it was not required to bring its case before HHS.

Circuit Judge Jennifer Walker Elrod wrote the opinion, joined by Circuit Judges Kyle Duncan. Both were appointed by Republicans. Circuit Judge Irma Ramirez, who was nominated by Biden, dissented, agreeing with Ezra's reasoning.