Judge tosses Big Pharma suit claiming drug price negotiation is unconstitutional

Enlarge / Stephen Ubl, president and chief executive officer of Pharmaceutical Research and Manufacturers of America (PhRMA), speaks during a Bloomberg Live discussion in Washington, DC, on Tuesday, Sept. 19, 2017.

A federal judge in Texas dismissed a lawsuit Monday brought by a heavy-hitting pharmaceutical trade group, which argued that forcing drug makers to negotiate Medicare drug prices is unconstitutional.

The dismissal is a small win for the Biden administration, which is defending the price negotiations on multiple fronts. The lawsuit dismissed Monday is just one of nine from the pharmaceutical industry, all claiming in some way that the price negotiations laid out in the Inflation Reduction Act of 2022 are unconstitutional. The big pharmaceutical companies suing the government directly over the negotiations include Johnson & Johnson, Bristol Myers Squibb, Novo Nordisk, Merck, and AstraZeneca.

Last month, a federal judge in Delaware heard arguments from AstraZeneca’s lawyers, which reportedly went poorly. AstraZeneca argued that Medicare’s new power to negotiate drug prices violates the company’s rights under the Fifth Amendment’s due process clause. The forced negotiations deprive the company of “property rights in their drug products and their patent rights” without due process, AstraZeneca claimed. But Colm Connolly, chief judge of the US District Court of Delaware, was skeptical of how that could be the case, according to a Stat reporter who was present for the hearing. Connolly noted that AstraZeneca doesn’t have to sell drugs to Medicare. “You’re free to do what you want,” Connolly reportedly said. You may not make as much money.

At a later point, Connolly bluntly commented: “I don’t find their argument compelling.”

Though the plaintiffs in the now-dismissed Texas also made an argument based on the Fifth Amendment’s due process clause, the case didn’t make it that far. US District Judge David Ezra in Austin, Texas, dismissed the case brought by one of the case’s three plaintiffs, saying the court lacked jurisdiction. And, because that one plaintiff is the only one based in the Western District of Texas, where the lawsuit was filed, he dismissed the case completely.

The three plaintiffs in the case were PhRMA, a powerful drug industry trade group representing high-profile drug makers, including Pfizer, GSK, Eli Lilly, and Sanofi; the Global Colon Cancer Association (GCCA); and the Texas-based National Infusion Center Association (NICA). Lawyers for the Biden administration filed a motion to dismiss the case, arguing that NICA is not a proper plaintiff.

Ezra found that for NICA to bring constitutional claims against Medicare’s price negotiations in a court, it is first required under federal rules to bring those claims through an administrative review process under the Medicare Act or the Centers for Medicare and Medicaid Services. Without a prior administrative review, the court has no jurisdiction.

“The Court lacks jurisdiction over NICA’s claims because the claims here ‘arise under’ the Medicare Act and the claims do not fall under the exception carved out for when claims may completely avoid judicial or administrative review. Therefore, NICA’s claims are dismissed without prejudice,” Ezra wrote in his ruling.

And, with the one Texas-based plaintiff, NICA, knocked out of the case, the Western Texas district is now the “improper venue” for a case brought by the remaining two plaintiffs, PhRMA and GCCA.

Ezra noted that in such situations, a judge can transfer the case to a court that would be considered a proper venue. But Ezra declined, noting that neither the plaintiffs nor defendants suggested a proper venue. And, even if they did, it likely wouldn’t matter, Ezra reasoned, because PhRMA and GCCA also haven’t gone through an administrative review.

“[T]he same federal jurisdictional defect likely exists for PhRMA and GCCA, as nothing suggests that either party has presented its claims to the [Health] Secretary,” Ezra wrote.

Ezra dismissed the case “without prejudice,” meaning the claims could be refiled. A spokesperson for PhRMA told FiercePharma: “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.”

Meanwhile, the first round of Medicare drug price negotiations is underway. Earlier this month, the federal government sent out its opening offers in the price negotiation process for the first 10 drugs selected. The bargaining will continue through the coming months, with an ending deadline of August 1, 2024. The prices will go into effect at the beginning of 2026.

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