AstraZeneca Case Leads Off Busy Year of Challenges to Medicare Drug Pricing Law

 A federal court in Delaware heard arguments Wednesday in a key lawsuit challenging Medicare drug-negotiation provisions of the Inflation Reduction Act (IRA). Reports from inside the courtroom suggested that the judge was skeptical of the arguments raised by plaintiff AstraZeneca, though experts told BioSpace this is just an early step in what could be a protracted series of legal battles.

Thursday, the Centers for Medicare and Medicaid Services (CMS) is due to release its proposed maximum fair price for the initial set of 10 single-source drugs chosen for negotiation, after which time, drug companies will have 30 days to respond.

While no ruling on AstraZeneca’s motion for summary judgment is expected for about a month, court activity will heat up over the next few weeks, as a total of 10 cases from pharma companies and groups have challenged various aspects of the IRA’s Medicare drug-pricing provisions. Other plaintiffs include Merck, Novartis, Johnson & Johnson, Bristol Myers Squibb, Boehringer Ingelheim, Novo Nordisk and the lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA).

Most are currently seeking summary judgment. There has been no ruling to date that would change or delay the regulatory path CMS and the Department of Health and Human Services (HHS) are pursuing. As of now, CMS is on schedule to publish negotiated rates by Sept. 1 that will take effect in January 2026, but the legal process is a long one.

“All of these cases ultimately have the potential to be appealed, and no doubt will be appealed,” said John Bennett, a Boston-based litigator at Allen & Overy who works with biopharma clients. “I think all of them in one shape or form have the possibility at least of potentially becoming precedent and potentially being argued at the Supreme Court.”

A Litany of Legal Arguments

The earliest suit, filed by Merck last June, claimed that the IRA violates that company’s First Amendment rights by forcing the firm to endorse speech it disagrees with and its Fifth Amendment rights by taking assets without compensation. AstraZeneca is also claiming a Fifth Amendment violation, but Judge Colm Connelly reportedly questioned whether the law amounts to an unconstitutional seizure.

Other litigants have cited due process arguments under the Fifth and Fourteenth Amendments, according to an analysis published in Health Affairs. PhRMA contended that the civil fines included in the IRA goes against the Eighth Amendment, which prohibits excessive fines.

AstraZeneca is taking a different tack altogether, choosing to focus on the logistics of the IRA’s implementation rather than the law’s constitutionality in pursuit of changes to the implementation plan. “[It’s] somewhat unique in that it is challenging some of the regulatory guidances that CMS has issued in the wake of the legislation passing,” Bennett said.

He added that it’s still unclear whether the AstraZeneca approach or the strategy favored by other drug companies will be more effective in court. “I think some of the constitutional arguments that have been raised are legitimate arguments,” Bennett said. “Whether or not they would ultimately succeed I think largely will depend on whether or not the industry can get some more traction on its argument that compliance with this regime and program really is not voluntary.”

Debbie Hart, president and CEO of BioNJ, a life sciences trade association in New Jersey, said in an email that she agrees with the claim that the IRA is essentially forcing drugmakers to bend to the will of the government rather than engage in true negotiation. “As a result, life sciences companies are in a position to ultimately accept a stipulated price or withdraw from the Medicare and Medicaid programs entirely, effectively barring all of the patients under those programs from access to those medications,” Hart told BioSpace.

The AstraZeneca suit in particular, with its focus on execution, demonstrates how CMS went “well beyond the letter of the law,” she added.

AstraZeneca did not respond to BioSpace's request for comment.

What to Expect of IRA Lawsuits This Year

Immediate attempts to stall the IRA’s implementation have failed. In late September, a federal judge threw out a motion for preliminary injunction by the Dayton (Ohio) Area Chamber of Commerce to block implementation of Medicare drug price negotiation. And the court in Delaware will not rule on Wednesday's AstraZeneca hearing until March 1, so CMS has no reason to pause its work, according to Kelly Bagby, vice president of litigation at AARP Foundation, which has filed several amicus briefs supporting Medicare drug price negotiation.

Whether courts set any precedent for Medicare drug price negotiation may depend on how cases are consolidated and how quickly the inevitable appeals process moves, according to the experts who spoke with BioSpace.

Bagby predicted that any appeals in the AstraZeneca suit in Delaware would be combined into the U.S. Court of Appeals for the Third Circuit, which also covers New Jersey, since the pending J&J, BMS, Novo Nordisk and Novartis cases were all filed there. “It seems likely that these five cases could be heard on appeal together,” Bagby told BioSpace in an email.

Bennett said it is hard to forecast whether any of the ongoing cases might prevail in blocking or altering IRA implementation, but he said to keep an eye on an upcoming Supreme Court ruling on a 40-year-old precedent called “Chevron deference,” which the high court reviewed last month. That doctrine holds that an administrative agency’s interpretation of a statute is “entitled to some measure of deference when the issue is litigated before a federal court,” Bennett explained.

A commentary in SCOTUSblog suggested that the Supreme Court was likely to overturn the 1984 ruling. Such a reversal could bolster the drug companies’ arguments, according to Bennett, or at least make it more likely that the high court would eventually take up the inevitable appeals regarding Medicare drug price negotiation.

“There will be decisions that will be coming down this calendar year that will be important,” Bennett said, “and it is something that obviously bears watching for the foreseeable future with multiple different courts and multiple different judges weighing in.”

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