First lawsuit against Medicare’s Drug Price Negotiation Program in the Inflation Reduction Act dismissed

Federal court in Texas dismisses the joint suit filed by PhRMA, the National Infusion Center Association, and the Global Colon Cancer Association, which declared the drug pricing provisions included in the Inflation Reduction Act as ‘unconstitutional.’ 

As covered on The Evidence Base, PhRMA (Pharmaceutical Research and Manufacturers of America), a trade group representing companies in the pharmaceutical industry in the US, joined forces with the National Infusion Center Association (NICA) and the Global Colon Cancer Association (GCCA) in filing legal action against the US government over measures to lower drug prices. In a suit filed in the US District Court for the Western District of Texas, they claimed the drug pricing program established under the Inflation Reduction Act (IRA) to be a ‘government mandate disguised as negotiation’ and ‘unconstitutional.’  

On February 12, 2024, the federal court in Texas dismissed the suit, explaining that NICA had not met the necessary requirements specified by the Medicare Act for the court to have jurisdiction over the case. Consequently, the judge dismissed the whole claim by PhRMA, NICA and GCCA in its entirety. In reaction to the news, Nicole Longo, a PhRMA spokesperson stated: “We are disappointed with the court’s decision, which does not address the merits of our lawsuit, and we are weighing our next legal steps.” 

Several other suits have also been made citing various legal arguments aimed at challenging the Centers for Medicare and Medicaid Services’ (CMS) ability to negotiate for lower drug prices in the negotiation program. This decision marks the first step in addressing these suits and, as noted by Karine Jean-Pierre, Biden’s press secretary, “is an important step in this Administration’s defense of the law.” 

As a reminder, the IRA directs CMS to establish the Drug Price Negotiation Program (DPNP). Through this program CMS will for the first time be able to negotiate maximum fair prices with pharmaceutical companies for certain medicines. The first 10 drugs subject to these negotiations were announced in August last year. CMS will carry out pricing negotiations with participating manufacturers, taking place in 2023 and 2024. Any negotiated prices will become effective from 2026.  By 2031, the program is expected to save $25 billion a year on Medicare spending. Any companies failing to negotiate with CMS face high penalties or withdrawal of their product from Medicare and Medicaid programs.  

The IRA is expected to precipitate numerous changes across the US healthcare system as well as having a substantial impact on drug discovery and development in the US. Whilst welcomed by many patient organizations, the number of lawsuits filed against the government represent a concerted effort by the industry to challenge the constitutionality of the DPNP and other provisions of the IRA. What happens next is subject to much conjecture and debate, and could ultimately lead to a showdown between the pharmaceutical industry and the government.