Updated Fri, September 29, 2023
By Brendan Pierson
(Reuters) -The U.S. government's Medicare health insurance program can begin negotiating prices for some prescription drugs this fall under a new program, a federal judge ruled on Friday, vindicating one of President Joe Biden's signature initiatives.
The order by U.S. District Judge Michael Newman in Dayton, Ohio, comes in a lawsuit brought against the Biden administration by the U.S. Chamber of Commerce.
The nation's largest business lobbying group argues that the program violates the U.S. Constitution by allowing the government to force drugmakers to accept unfairly low prices, and would stifle innovation.
Newman in a preliminary order rejected that argument, finding that drugmakers were unlikely to prevail in the case. He said they were not being forced to give anything up because participating in Medicare is "completely voluntary."
"As there is no constitutional right (or requirement) to engage in business with the government, the consequences of that participation cannot be considered a constitutional violation," he wrote.
The Chamber of Commerce and the U.S. Justice Department did not immediately respond to requests for comment.
The Biden administration "will continue fighting to lower health care costs for American families, no matter how many challenges Republicans and Big Pharma put in our way," White House spokesperson Karine Jean-Pierre said in a statement.
Although Newman's ruling allows the price negotiation program to begin as scheduled on Oct. 1, the judge allowed the lawsuit to continue, denying a motion by the government to dismiss it altogether.
The ruling is the first to come from multiple lawsuits by drug companies and industry groups challenging the program. Newman was appointed to the bench by Republican former President Donald Trump.
The drug price negotiation program is part of the Inflation Reduction Act, which Biden, a Democrat, signed last year.
Americans pay more for prescription medicines than people in any other country. The program aims to save $25 billion annually by 2031 by requiring drugmakers to negotiate the prices of selected expensive drugs with the U.S. Centers for Medicare and Medicaid Service (CMS), which oversees Medicare.
Medicare mostly serves the millions of Americans aged 65 and older.
Drugmakers whose medicines were selected for the first round of pricing negotiations must agree to begin talks on Oct. 1. Those who do not negotiate either would have to pay steep penalties, up to 19 times a drug's sales, or stop participating in the government healthcare programs, which account for a significant portion of the companies' U.S. sales.
CMS announced the first 10 drugs to be negotiated on Aug. 29. They include the blood thinners Eliquis from Bristol Myers Squibb and Pfizer, Xarelto from Johnson & Johnson, Merck & Co's diabetes drug Januvia, and AbbVie's leukemia treatment Imbruvica.
The negotiated prices would take effect in 2026 with a minimum discount from the list price at 25%.
The Chamber of Commerce's lawsuit is one of several similar cases challenging the program. The others were filed by individual drugmakers and by Pharmaceutical Research and Manufacturers of America, the leading drug industry lobbying group.
Companies that have sued over the program include J&J, Merck, Bristol Myers and Boehringer Ingelheim, which make drugs on CMS's negotiation list.
The Chamber of Commerce was the only plaintiff to ask for a preliminary injunction halting the price negotiations while its lawsuit proceeds. The other lawsuits are moving at a slower pace, and judges may not rule on them until next year.
The Biden administration has repeatedly said there is nothing in the Constitution that prohibits drug price negotiations. Many other countries already negotiate drug prices.
(Reporting By Brendan Pierson in New York and Nate Raymond in Boston; additional reporting by Costas Pitas; Editing by Alexia Garamfalvi, Bill Berkrot, Chris Reese and Leslie Adler)
Federal judge denies request to block Medicare negotiation
Joseph Choi
Fri, September 29, 2023
A federal judge on Friday declined to block the Medicare Drug Price Negotiation program, meaning companies will have to play ball with the government for the time being.
U.S. District Judge Michael J. Newman ruled against a request for a preliminary injunction on the program that was requested by the Chamber of Commerce in its lawsuit to stop negotiations.
His ruling comes right before the Oct. 1 deadline by which drugmakers whose products were named for negotiation are required to sign agreements to engage in the process or face the penalties.
Along with denying the Chamber’s request for an injunction, Newman also denied a request from the federal government to dismiss the case entirely. The government is arguing the Chamber has no standing to sue over Medicare negotiation since it’s not a pharmaceutical company itself.
Newman issued no opinion on whether the trade group had standing and said he “will entertain the filing of one or more renewed motion(s) to dismiss.” The Chamber has maintained that it can sue on behalf of its members.
The judge noted that while case law regarding associational standing is “scarce,” individual participation from a member of an organization is ” not normally necessary” when a group is seeking relief on behalf of said member.
Many of the companies — Merck, Bristol Myers Squibb and AstraZeneca — have said they plan to sign the agreements, albeit with protest.
Oral arguments over the injunction were heard two weeks ago in the Southern District Court of Ohio.
The legal threshold for obtaining a preliminary injunction involves demonstrating the party which requested it is likely to succeed in the case based on the merits, that the party will suffer irreparable harm without an injunction, the opposing party will not suffer harm as a result and that issuing an injunction is in the interest of the public.
During the oral arguments, the Chamber asserted it would win in the case because the program is not truly a negotiation, but a scheme passed by Congress to “blur lines of accountability.”
In its request, the Chamber said “irreparable harm” would occur and has already been experienced by some of its members. The government pushed back on these assertions, noting that the negotiated prices are years away from going into effect.
The Chamber alleged a host of constitutional violations within the Medicare negotiation program in its lawsuit and they argued that blocking any constitutionally unsound program is in the public’s interest.
Based on his decision, it appears Newman was unconvinced by the Chamber’s argument.
“They have demonstrated neither a strong likelihood of success nor irreparable harm. Consequently, their request for immediate preliminary injunctive relief—to stop implementation of the Program on or before October 1, 2023—is denied,” Newman stated in his ruling.
Another key aspect of the government’s argument against the lawsuits to stop Medicare negotiation is that the program is voluntary at the end of the day, meaning no companies are compelled to take part in it if they disagree with how it’s operated. Newman appeared to agree with this argument in his ruling on Friday.
Noting a prior ruling, Newman found that “participation in Medicare, no matter how vital it may be to a business model, is a completely voluntary choice.”
The lower, negotiated prices are set to go into effect at the start of 2026 if everything goes to plan. The government had argued that all the lawsuits suing to stop Medicare negotiation will likely have been decided by that point, making the supposedly urgent need for an injunction moot.
During the oral arguments, the government emphasized the fact that the Chamber itself is not a pharmaceutical company and would not suffer harm as a result of the negotiation program, even as it is suing on behalf of one of its members.
With the preliminary injunction denied, the negotiation process is now free to proceed as scheduled, with talks set to take place during 2023 and 2024.
This story was updated at 6:27 p.m.
A federal judge on Friday declined to block the Medicare Drug Price Negotiation program, meaning companies will have to play ball with the government for the time being.
U.S. District Judge Michael J. Newman ruled against a request for a preliminary injunction on the program that was requested by the Chamber of Commerce in its lawsuit to stop negotiations.
His ruling comes right before the Oct. 1 deadline by which drugmakers whose products were named for negotiation are required to sign agreements to engage in the process or face the penalties.
Along with denying the Chamber’s request for an injunction, Newman also denied a request from the federal government to dismiss the case entirely. The government is arguing the Chamber has no standing to sue over Medicare negotiation since it’s not a pharmaceutical company itself.
Newman issued no opinion on whether the trade group had standing and said he “will entertain the filing of one or more renewed motion(s) to dismiss.” The Chamber has maintained that it can sue on behalf of its members.
The judge noted that while case law regarding associational standing is “scarce,” individual participation from a member of an organization is ” not normally necessary” when a group is seeking relief on behalf of said member.
Many of the companies — Merck, Bristol Myers Squibb and AstraZeneca — have said they plan to sign the agreements, albeit with protest.
Oral arguments over the injunction were heard two weeks ago in the Southern District Court of Ohio.
The legal threshold for obtaining a preliminary injunction involves demonstrating the party which requested it is likely to succeed in the case based on the merits, that the party will suffer irreparable harm without an injunction, the opposing party will not suffer harm as a result and that issuing an injunction is in the interest of the public.
During the oral arguments, the Chamber asserted it would win in the case because the program is not truly a negotiation, but a scheme passed by Congress to “blur lines of accountability.”
In its request, the Chamber said “irreparable harm” would occur and has already been experienced by some of its members. The government pushed back on these assertions, noting that the negotiated prices are years away from going into effect.
The Chamber alleged a host of constitutional violations within the Medicare negotiation program in its lawsuit and they argued that blocking any constitutionally unsound program is in the public’s interest.
Based on his decision, it appears Newman was unconvinced by the Chamber’s argument.
“They have demonstrated neither a strong likelihood of success nor irreparable harm. Consequently, their request for immediate preliminary injunctive relief—to stop implementation of the Program on or before October 1, 2023—is denied,” Newman stated in his ruling.
Another key aspect of the government’s argument against the lawsuits to stop Medicare negotiation is that the program is voluntary at the end of the day, meaning no companies are compelled to take part in it if they disagree with how it’s operated. Newman appeared to agree with this argument in his ruling on Friday.
Noting a prior ruling, Newman found that “participation in Medicare, no matter how vital it may be to a business model, is a completely voluntary choice.”
The lower, negotiated prices are set to go into effect at the start of 2026 if everything goes to plan. The government had argued that all the lawsuits suing to stop Medicare negotiation will likely have been decided by that point, making the supposedly urgent need for an injunction moot.
During the oral arguments, the government emphasized the fact that the Chamber itself is not a pharmaceutical company and would not suffer harm as a result of the negotiation program, even as it is suing on behalf of one of its members.
With the preliminary injunction denied, the negotiation process is now free to proceed as scheduled, with talks set to take place during 2023 and 2024.
This story was updated at 6:27 p.m.
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