BMS, J&J Losses Not the End of IRA Legal Battle

 Although a New Jersey federal judge last week dismissed the cases brought by Johnson & Johnson and Bristol Myers Squibb against the IRA, both companies have said they will appeal the ruling. In addition, there are several remaining lawsuits challenging the Inflation Reduction Act’s (IRA) Drug Price Negotiation Program.

Last Monday, Judge Zahid Quraishi ruled in a summary judgment that the IRA’s price negotiations do not violate the Fifth Amendment’s takings clause and the First Amendment’s freedom of speech, which are the two constitutional claims at the core of the pharmaceutical industry’s arguments.

“The judge’s opinion aligns completely with my own, in that he found that the IRA provisions did not violate either the Fifth Amendment takings clause or the First Amendment free speech clause,” said Sean Tu, a law professor at West Virginia University. “The court basically took the same stance that I took on the First, Fifth and unconstitutional conditions arguments, in that they are bogus.” Tu recently published an opinion piece in JAMA on the First Amendment free speech claims raised by drug manufacturers in such lawsuits.

This opinion could affect similar cases that are currently being heard in other courts across the country, Tu said.

First and Fifth Amendment Challenges to the IRA

Novartis and Novo Nordisk, which jointly presented arguments with BMS and J&J on March 7, are still waiting to hear the outcome of their challenges, as are Merck and Astellas. AstraZeneca lost its case challenging the IRA in a Delaware federal court earlier this year, but last Monday appealed the decision.

Kelly Bagby, vice president of litigation at the AARP Foundation, previously told BioSpace that an AstraZeneca appeal could be combined with potential appeals from BMS, J&J, Novo Nordisk and Novartis to go before the U.S. Court of Appeals for the Third Circuit. “It seems likely that these five cases could be heard on appeal together,” Bagby said.

BMS and J&J allege in their respective lawsuits that the price negotiations mandated by the IRA constitute a form of “compelled speech” and violate the company’s First Amendment rights by coercing them into saying that they agree with the price the government dictates.

Tu reiterated that he isn’t surprised this argument didn’t fly. If courts allow drug firms to challenge IRA price negotiations as violating their First Amendment rights, this would present a problem for the Department of Veterans Affairs, Medicaid and any other government entity that attempts to negotiate prices as part of a contract, he explained. “So Boeing could potentially cry First Amendment foul issues if they are unhappy with the price that the government negotiates for fighter jets.”

Most of biopharma’s IRA lawsuits also argue that the law violates the due process clause of the Fifth Amendment and claim that the power afforded to the U.S. Department of Health and Human Services (HHS) to effectively set drug prices for certain products would interfere with their property rights, including those conferred by patents.

Tu said he believes that the Fifth Amendment argument is stronger than the First Amendment challenge, although, in his opinion, both are pretty weak arguments. “There is no Fifth Amendment ‘taking’ of the drug,” Tu said. “Drug companies have the choice to sell to the government or not sell to the government. That is not a taking.”

Judge Quraishi agreed last week. “In short, Defendants are not taking drugs from Plaintiffs,” Quraishi wrote in his ruling on BMS’ and J&J’s challenges. “Selling to Medicare may be less profitable than it was before the institution of the Program, but that does not make Defendants’ decision to participate any less voluntary.”

Tu noted that companies could potentially argue a “taking” of the patent rights. “The argument goes, ‘You took my intellectual property rights and now you should have to pay me for them,’ but this argument also fails,” he said. “First, the government is not taking the intellectual property rights or even making the rights less valuable. The drug company could leave the Medicare market and sell their drug on the private market.”

The Supreme Court has stated that patents are not “property,” but more akin to government franchise. “However, that court specifically did not give an opinion on if patents should be considered ‘property’ for Fifth Amendment purposes,” he said. “So my fear is that the Supreme Court might take this case up and state that patents should be considered ‘property’ for Fifth Amendment purposes. Then you would have to go through a separate set of analyses to determine if there was a taking and what ‘just compensation’ would look like.”

Another Issue Threatening Biopharma’s Bottom Line

A separate but related issue is the PREVAIL Act, which is currently pending in Congress and would make fundamental changes to the patent challenge process if passed. The goal of the bill is to address long-standing concerns and improve fairness for all parties involved in a patent. One notable change is that challengers to the patent would have to demonstrate that they are being sued for infringement or that they are facing a credible threat of litigation before initiating a challenge to the Patent Trial and Appeal Board (PTAB). This requirement would potentially prevent abusive practices and ensure that only legitimate challenges are brought forward

Senators Thom Tillis (R-North Carolina) and Chris Coons (D-Delaware) co-sponsored the legislation, whose full name is the Promoting and Respecting Economically Vital American Innovation Leadership Act, to strengthen patents and limit harm from inter partes review (IPR), a procedure for challenging the validity of a patent before the United States Patent and Trademark Office. Tillis and Coons assert that the legislation will restore fairness to the office’s Patent Trial and Appeal Board (PTAB) and promote innovation and competition.

Critics of PREVAIL, such as the Electronic Freedom Foundation (EFF), argue that the legislation will ban most people from challenging bad patents and unfairly benefit biopharma. It tweaks the patent challenge system in other ways too, and EFF argues that those changes would primarily benefit patent trolls and a few large patent owners.

Laura Dolbow, Sharswood Fellow at the University of Pennsylvania Carey Law School, said that the PREVAIL Act would offer greater patent protection because it would make it harder for patents to be challenged and invalidated through administrative procedures at PTAB. “Administrative procedures offer a quicker and less expensive avenue for third parties to challenge patents” compared with a lawsuit, she told BioSpace. “The changes proposed in the PREVAIL Act would limit when third parties can file petitions for administrative review and would increase the burden of proof to show invalidity in those proceedings.”

Arti Rai, faculty director of the Center for Innovation Policy at Duke University School of Law, noted that “Both the challenges to the IRA and the passage of PREVAIL would, if successful, give pharmaceutical firms more pricing power.”

https://www.biospace.com/article/bms-j-and-j-losses-not-the-end-of-ira-legal-battle/