Big Pharma ‘throwing the kitchen sink’ in effort to halt Medicare drug price negotiations 


August 23, 2023

Pharmaceutical companies are scrambling to prevent Medicare from negotiating prescription drug prices, a key element of the Inflation Reduction Act that Congress passed and President Biden signed into law just over a year ago. 

By September 1, the Center for Medicare and Medicaid Services (CMS) is expected to announce the first ten drugs that will be subject to price negotiations. But since June, at least seven lawsuits have been announced in six different federal courts. The lawsuits – the latest of which was filed just last Friday — have been filed by Boehringer Ingelheim, Merck, Bristol Myers Squibb, Astellas Pharma, and Johnson & Johnson-owned Janssen Pharmaceuticals as well as the lobby trade group PhRMA and the U.S. Chamber of Commerce. The industry wants to prevent drug price negotiations from getting off the ground. 

Interestingly, the lawsuits have been filed in a number of geographically disparate locations, including West Texas, Connecticut, New Jersey, Illinois, Ohio, and Washington, D.C. Experts say the pharmaceutical industry is hoping for conflicting court rulings that quite possibly would hasten Supreme Court review of the constitutionality of the Inflation Reduction Act’s Medicare drug pricing provision. 

Under the new law, seniors, people with disabilities, and their families will save millions of dollars on the cost of prescription drugs. Reforms in the Inflation Reduction Act – in addition to lowering drug prices by allowing Medicare to negotiate lower drug costs — include capping the cost of most insulin products at $35 a month for Medicare participants, limiting out-of-pocket prescription drug costs for seniors to $2,000 a year, making recommended vaccines free for Medicare beneficiaries, requiring prescription drug companies to pay rebates to Medicare if they raise their prices faster than inflation, and helping millions save an average of $2,400 per family on their health insurance premiums through the Affordable Care Act’s premium subsidies. Some parts of the Inflation Reduction Act already have been implemented; other parts will be phased in in the years to come. For example, new drug prices under the Medicare negotiations are scheduled to be announced in September 2024 and take effect in September 2026. 

Advocates warn that if the pharmaceutical industry prevails in their legal efforts to stop drug price negotiations, it will be a sharp blow to consumers, particularly seniors on Medicare, who stand to save considerable sums of money on drug prices in the years to come. 

“With Medicare slated to begin negotiating lower prescription drug prices with big drug companies in the coming weeks, drug companies and their mega lobbying group allies are desperately suing the federal government in an effort to protect their profits by halting the popular program,” Protect Our Care said in a statement. “These meritless lawsuits are about one thing: protecting drug companies’ outrageous profits. According to STAT, the U.S. Chamber of Commerce spent nearly $30 million in lobbying efforts in 2021. While they rake in billions, U.S. drug prices are up to four times higher than prices in other high-income countries, leading patients in America to cut pills and skip doses to make ends meet.” 

In response to the lawsuits, the Biden Administration and advocacy organizations including Protect Our Care and Public Citizen have filed briefs to deny the pharmaceutical industry’s request for a preliminary injunction and protect the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. 

The pharmaceutical industry is offering up a smorgasbord of legal arguments in an effort to halt the negotiations – combined, it is arguing that the Inflation Reduction Act violates the Fifth, Eighth, and First Amendments to the U.S. Constitution. 

Lawrence O. Gostin, an expert in public health law at Georgetown University, told the New York Times that the drug industry “is throwing the kitchen sink at the government…They’re looking for what sticks and their arguments are directly targeted at the Supreme Court.” 

So what are the drug industry’s arguments and are they valid? 

The industry argues that the new law violates the “takings” clause of the Fifth Amendment, which prohibits government from taking private property for public use without just compensation. And it argues that an excise tax that drug companies could face if they refuse to abide by the negotiated drug prices amounts to an excessive fine that is prohibited by the Eighth Amendment. Finally, drug companies argue that the First Amendment would be violated by compelling drug companies to agree in writing that they are negotiating a “fair price.” 

Protect Our Care, which as noted above is part of the legal proceedings, has an answer for every argument advanced by the drug industry.  

Regarding the First Amendment argument and “takings,” Protect Our Care counters that no drug company is required to participate in the Medicare market.  “Drug manufacturers – like physicians, hospitals, clinical labs, insurers, and other health care industry stakeholders – choose to participate in Medicare on a voluntary basis,” the group says. “If a manufacturer of a selected drug does not want to negotiate the price of a selected drug or cannot come to an agreement on a negotiated price, the manufacturer can withdraw from participation.” 

Regarding the Eighth Amendment claim, Protect Our Care says the Supreme Court has “famously ruled that Congress has broad and far-reaching authority to tax.” 

Although the group acknowledges that the Eighth Amendment protects against “punitive” or “grossly disproportionate” taxes, the excise tax levied if drug companies refuse to comply with Medicare’s Negotiation Program  “…is neither a compulsory tax nor is it punitive. Drug companies can avoid the tax by complying with the Negotiation Program or simply exiting the Medicare and Medicaid programs.” 

And in response to the First Amendment argument, Protect Our Care again notes that, “[t]he Negotiation Program does not force drug companies to enter into agreements against their will; participation in Medicare is completely voluntary and the plaintiffs are attempting to stretch First Amendment doctrine beyond belief.” 

“PhRMA itself lost a First Amendment challenge to California’s drug pricing legislation in 2021, and the Supreme Court has previously explained that the government may attach certain conditions and language to funding and programs without violating the First Amendment, even where private actors disagree with those conditions and language,” the group says. 

Of the three arguments advanced by the drug industry, it is the Fifth Amendment claim that most worries Gostin, the Georgetown University expert in public health law. 

Gostin personally favors Medicare drug price negotiations. “To me, Medicare is doing what it should do,” Gostin said. “It’s a huge buyer of a product, and it’s basically using that clout, that bargaining power, to get the best price.”

But he worries whether the law will pass muster with a Supreme Court that at times has appeared overly receptive to the desires of big business interests.  

“The Supreme Court is openly hostile to any perceived violation of the Fifth Amendment,” Gostin said, adding, “It would not surprise me at all to see these cases go up to the Supreme Court and have them strike it down.” 

That would be a shame for America’s seniors, many of whom face spiraling prescription drug costs while living on fixed incomes. Just last week, in a friend-of-the-court brief filed in federal court in Ohio, AARP assessed the potential damage. 

“Stopping the drug price negotiation program before it even begins is not in the public interest,” AARP said. “On the contrary, it will only reinforce the substantial harm that the IRA is meant to prevent. It would protect the pharmaceutical industry’s unreasonable and astronomical profits at the expense of what people with chronic conditions need to survive.” 

CHN last week joined more than 70 other groups in signing a letter asking the drug companies, PhRMA, and the U.S. Chamber of Commerce to drop their litigation efforts. 

“We stand with patients across the country whose lives and well-being depend on access to affordable prescription drugs,” the letter states. “We will not relinquish these commonsense reforms while high drug prices remain a matter of life and death for so many Americans. We call on you to stop suing Medicare and negotiate lower prices now.”

CHN will continue monitor this important issue – lowering Medicare prescription drug costs should be just the first step in a comprehensive effort to reduce drug prices for everyone in the U.S 

Inflation Reduction Act
Medicare drug prices