Inflation Reduction Act: Drug Manufacturers Chosen for Medicare Drug Price Negotiations Amid Numerous Lawsuits

The Biden administration announced this week that all 10 manufacturers whose drugs have been selected for “negotiation” under the Inflation Reduction Act’s Medicare Part D Drug Price Negotiation Program have executed the agreement to participate in negotiations for the selected drugs. The administration is proceeding with implementation of the Drug Price Negotiation Program amidst numerous pending federal lawsuits challenging the constitutionality of the program and the legality of the Centers for Medicare & Medicaid Services’ (CMS) approach to implementation. 

CMS will now enter into “negotiations” with these participating manufacturers through August 1, 2024. According to CMS Guidance, the “negotiation period” will include various meetings with the manufacturers as well as listening sessions with patients, consumer groups, and other interested parties to obtain input on the selected drugs. Subject to the pending federal lawsuits, CMS will publish the “negotiated” prices on September 1, 2024, and they will be applicable for calendar year 2026.

The announcement came days after a federal judge declined to block the Biden administration from implementing the program. Judge Michael Newman of the Southern District of Ohio, a nominee of former President Donald Trump, denied a preliminary injunction sought by business groups, including the U.S. Chamber of Commerce (Chamber). The plaintiffs may appeal the decision before November 28.

At the same time, the court denied the government’s motion to dismiss the case for lack of standing. The court noted the government’s concern that the Chamber member who was cited as the basis for standing in the lawsuit may not be injured by the program because a wholly owned subsidiary of the pharmaceutical company holds the Food and Drug Administration approval for and makes the drug selected for “negotiation.” But the court’s decision states that the Chamber is permitted to amend its complaint by October 13 to clarify its standing, including with respect to the injuries suffered by the member as a result of the program.

The Chamber’s suit is the only one of the nine pending legal challenges to the program in which a plaintiff has sought a preliminary injunction. Seven manufacturers, as well as the Pharmaceutical Research and Manufacturers of America, have filed suits alleging that the program is unconstitutional or otherwise unlawful, each under various theories — including the Due Process Clause, the Fifth Amendment’s Takings Clause, the First Amendment, and others. Suits are pending in six federal district courts across five federal circuits. Stakeholders should continue to monitor the implementation period carefully as the decisions made by CMS during implementation will provide further definition about the implications of the program for stakeholders and may create additional controversy and opportunities for legal challenges.