Back in Court: The Inflation Reduction Act's Drug Pricing Ideas

 BY DEREK LOWE

I wrote here in September about Merck's lawsuit fighting the Medicare-drug-price-negotiation mechanism in new Inflation Reduction Act, but they're not the only drug company in court about this, nor are their arguments the only ones being deployed. AstraZeneca also filed suit back in August, and there have been more filings in this case since then. In November, the US government answered in their own filing by saying that the company lacks standing to bring any such complaint and that their legal argument is flawed from the start anyway.

That argument is on a different basis than Merck's suit (which is largely based on constitutional provisions against "illegal takings" by government action). Instead, AZ says that the drug-price provisions of the new law violate the Administrative Procedures Act. The law says that ten "qualifying single-source drugs" a year (starting in 2026) will be subject Medicare (CMS) price negotiations - that is, only ones that have no generic or biosimilar competition (and were approved a sufficient number of years beforehand). And for the first round of such price restrictions, the agency needs to see proof of such generic competition by August of 2024 (which is when the negotiation period for the 2026 price changes ends, apparently). The deadline to make the call for the 2027 price changes is April of 2026. The law says that there has to be "bona fide" marketing for such a generic competitor, and they have a number of criteria for determining that.

And that's where AZ says the law is written in an illegal fashion. Their diabetes drug Farxiga (dapaglifozin) is on the list, but a generic competitor won't be on the market until after the August 2024 date (but will be in place before the actual price restrictions hit). So they will be subject to generic competition, but will have to negotiate their price down with CMS as if they didn't have any such competition at all, and will thus feel both effects at the same time. The company also says that the rules for determining whether something is a single-source drug will discourage it (and any othe drug company) for researching further uses of such a drug, since any new indication for it or new formulations for it will be automatically subject to the negotiated price. They note that Farxiga itself has had its FDA approval label extended to things like prevention of cardiovascular events in diabetes patients due to the company running further trials on it, but that this sort of work will be actively discouraged by the IRA provisions:

CMS’s definition of Qualifying Single Source Drugs dramatically alters manufacturers’ incentives to invest in such follow-on therapies using a previously approved active moiety. Under the agency’s approach, a product approved under a different NDA with the same active moiety as a selected drug product will now be treated as the same drug, and immediately become subject to the Maximum Fair Price. Under the agency’s definition, AstraZeneca would have no incentive to spend years and a steep financial investment researching alternative treatment uses for the active moiety of a selected product. 

The company claims that both overriding the existing definiton of a single-source drug and the "sweeping" of later iterations under its provisions violate the Administrative Procedures Act. I myself am not enough of a lawyer to say if this argument has any force. I doubt that the government's claim that the company has no standing to sue will hold up ("You don't even have standing" is a standard legal tactic, just as asking for summary judgment is), but I can't guess intelligently how the two sides will fare in front of a judge. But we'll be finding out in the next few months, and finding out if all these legal challenges will delay the CMS timetable in general.

https://www.science.org/content/blog-post/back-court-inflation-reduction-act-s-drug-pricing-ideas