Relevant Document:
Summary Judgment Motion
The Pharmaceutical Research and Manufacturers of America, or PhMRA, the National Infusion Center Association and the Global Colon Cancer Association on Thursday, Aug. 10, filed a motion for summary judgment in their June 21
lawsuit to block implementation of the Inflation Reduction Act’s, or IRA’s, Drug Price Negotiation Program. The program, implemented by the Department of Health and Human Services, or HHS, and the Center for Medicare and Medicaid Services, or CMS, seeks to reduce prescription drug costs for Medicare recipients and lower drug spending by the federal government.
“Congress adopted a complex and entirely novel structure that, at every turn, seeks to avoid accountability and oversight, obscuring the fact that drug prices are being dictated by government fiat,” the trade associations write. “[T]his law will dramatically slow innovation, reduce the availability of new medicines, and undermine public health, causing grave harm to patients, pharmaceutical manufacturers, and healthcare providers,” the motion adds.
PhMRA’s lawsuit is one of several from major pharmaceutical companies and chambers of commerce challenging the program, which would reduce reimbursements for a number of important drugs starting in 2026. The lawsuits seek to limit the program at its inception by declaring it unconstitutional and preventing CMS from initiating the negotiation process on Sept. 1.
The trade associations and government parties
agreed on Aug. 1 that the case “presents legal questions that can properly be resolved through dispositive motions, without the need for discovery.” In their motion for summary judgment, the plaintiffs claim the Drug Price Negotiation Program “delegated unconstrained authority” to the agencies in violation of the U.S. Constitution’s separation of powers and the nondelegation doctrine. They also argue the program violates the Eighth Amendment’s excessive fines clause and the Fifth Amendment’s due process clause.
The trade association plaintiffs argue in their complaint that the program is a “sham” that “violates the Fifth Amendment’s Due Process Clause by exempting key decisions from public input and insulating them from administrative or judicial review.” The drug price negotiation program “denies manufacturers, providers, and patients the right both to front-end input on how the Program will be implemented and to back-end judicial or administrative review after critical implementation decisions have been made.” The law therefore “deprives pharmaceutical manufacturers of their constitutionally protected property interests … without affording constitutionally adequate procedural protections,” according to the complaint.
The law also “impermissibly delegated broad, unconstrained authority to HHS to set prices within Medicare, including between manufacturers and the private prescription drug plans that serve Medicare beneficiaries, in conflict with fundamental separation-of-powers and nondelegation principles,” according to the trade associations. Congress set no meaningful constraints on the agency’s exercise of this new price-setting authority, the plaintiffs add.
The plaintiffs also argue that the program infringes on the Eighth Amendment’s excessive fines clause by imposing an excise tax that “aims to force compliance with the sham negotiation scheme by imposing ruinous consequences on any pharmaceutical manufacturer that does not acquiesce.”
The associations allege that manufacturers that do not agree to the negotiated prices will face a daily tax that “increases swiftly to 1,900% of a drug’s total revenues,” and those that fail to provide access to the maximum fair price, or MFP, “are subject to a civil monetary penalty of ten times the difference between the price the manufacturer actually makes available and the MFP, multiplied by the total number of units sold.”
The only alternative to participating in the program if their drug is included, according to the trade associations, is to “exit the Medicare and Medicaid programs altogether.” In such circumstances, the manufacturers would still be “constrained by a statutorily mandated delay of 11 to 23 months - during which time the manufacturer is forced to continue participating in the sham ‘negotiation,’” the complaint alleges.
Under Judge Robert Pitman’s Aug. 2
scheduling order, HHS and CMS must submit their opposition to the plaintiffs’ motion for summary judgment by Sept. 29.
The Inflation Reduction Act’s Drug Price Negotiation Program
President Joe Biden
signed the IRA, which included the
Drug Price Negotiation Program, on Aug. 16, 2022. The program seeks to ease the burden on patients and lower prices for the costliest medications. The program permits Medicare to negotiate lower prices directly with drug manufacturers for prescription drugs covered under Part B or Part D plans that have no generic or biosimilar competition. By Sept. 1, CMS will publish the first 10 drugs selected for negotiation, for which the new price will become effective on Jan. 1, 2026.
According to the program’s guidelines, during a negotiation period that will end on Aug. 1, 2024, manufacturers will have an opportunity to counter-offer the new proposed price and will have three opportunities to participate in negotiation meetings with CMS. HHS will then repeat this process annually, selecting 15 more Part D drugs for 2027, 15 Part B and Part D drugs for 2028 and 20 additional drugs from either plan for each subsequent year.
Drug manufacturers that fail to comply with certain program deadlines or other requirements may be subject to excise tax liabilities or civil monetary penalties that are calculated according to the drug’s revenue, according to the program’s
guidelines.
Pharmaceutical Companies’ Suits
Several pharmaceutical companies have also sued the government to block the program, echoing the pharmaceutical associations’ allegations that the program is unconstitutional and forces the companies to accept lower payments for medications, taking away crucial resources from research and drug development.
Merck on June 6 sued HHS in D.C. federal court, arguing that the program “involves neither genuine ‘negotiations’ nor real ‘agreements.’” The company states that the program violates the First Amendment for “conscripting companies to legitimize government extortion” by requiring “manufacturers to convey that they ‘agree’ to HHS’s ‘fair’ prices.”
The company also asserts that the program allows the agencies to obtain “prescription drugs without paying fair market value,” in violation of the takings clause of the Fifth Amendment.
Merck
submitted a motion for summary judgment on July 11, citing the program’s “unconstitutional compelled speech” that requires the company to agree to new MFPs. The government “uses the threat of enormous monetary penalties to compel manufacturers to provide Medicare beneficiaries with ‘access’ to their drugs at whatever discounted price the Government, in its unreviewable discretion, selects,” according to Merck.
The company lists several of its own drugs that it expects to be part of the program in the first several cycles of negotiations, including diabetes drugs Januvia and Janumet and cancer drug Keytruda.
HHS has until Sept. 11 to respond to the plaintiffs’ motion for summary judgment.
On June 16,
Bristol Myers Squibb and
Janssen Pharmaceuticals each filed their own lawsuit in a New Jersey District Court, alleging - similar to Merck - that the program violates the First and Fifth amendments. Bristol Myers says that the program “creates an unprecedented regime whereby the Secretary of the U.S. Department of Health and Human Services … dictates a price at which pharmaceutical companies are compelled to sell their most innovative and successful medicines or else face unconscionable penalties.”
Bristol Myers’ and Janssen’s motions for summary judgment are each due Aug. 16.
Chambers of Commerce Suit
On June 9, the U.S. Chamber of Commerce, along with several state affiliate associations,
sued HHS and CMS in an Ohio federal court, arguing that the drug price negotiation program grants the government a “radical new authority” to negotiate drug prices.
The program represents a “disastrous error of public policy,” the plaintiffs argue. “[R]equiring pharmaceutical manufacturers to sell their drugs at unfairly low, government-mandated prices will disrupt and endanger vital research and development, eliminate jobs, deprive patients of access to life-saving and life-enhancing therapies, increase the overall long-term costs of care, and discourage investment in a sector that is critical for our nation’s security as well as the public health,” the chambers of commerce allege.
“The program is a violation of America’s fundamental constitutional requirements of limited government, property rights, the rule of law, and the separation of powers,” according to the associations.
The plaintiffs, addressing their standing to sue, say that they each have members that will be subject to and adversely affected by price negotiations, arguing that the program will deprive “members of their constitutional rights, make it more difficult for them to operate their businesses, and stifle healthcare innovations.”
The complaint specifically mentions Dayton Area Chamber and U.S. Chamber of Commerce member Abbvie and its drug Imbruvica, which market analysts expect to be on the Sept. 1 list of selected drugs and thus will be forced to “‘agree’ to the Secretary’s unreasonably low ‘maximum fair price,’ which will be substantially lower than current market prices” for the drug.
On July 12, the plaintiffs
filed a motion for preliminary injunction to halt the implementation of the program. HHS and CMS are expected to file a response to the motion as well as a motion to dismiss the lawsuit. The plaintiffs have until Aug. 25 to file a reply in support of their motion for preliminary injunction.