Chamber of Commerce Takes Legal Action to Halt Medicare Drug Price Negotiation Program

A staff member sorts through drugs drugs while filling a prescription at the Clay-Battelle Community Health Center's pharmacy in Blacksville, W.Va., on March 21, 2017. Brendan Smialowski/AFP via Getty Images

The U.S. Chamber of Commerce has asked a federal judge in Ohio to block the implementation of the “Medicare Drug Price Negotiation Program” established under the Inflation Reduction Act (IRA).

President Joe Biden signed the IRA into law in August 2022, enabling Medicare to directly negotiate drug prices for certain costly medications. The program has the potential to save Medicare nearly $100 billion between 2026 and 2031, according to estimates from the Congressional Budget Office (CBO).

In a motion filed on Wednesday, the Chamber of Commerce argued that its members would “suffer unrecoverable economic losses” if an injunction against the program was not ordered. The Chamber filed its lawsuit in June in the southern district of Ohio.

The lawsuit argues that the drug price negotiation program infringes upon the First and Fifth Amendments of the U.S. Constitution, as well as the principle of separation of powers.

Health and Human Services (HHS) Secretary Xavier Becerra is set to release a list of 10 expensive drugs by Sept. 1, which will be chosen for the negotiations. Following the announcement, pharmaceutical companies will need to make a decision on whether to enter into agreements to engage in the discussions by October.

The motion asks Judge Thomas Rose to order an injunction to block the negotiations before they get underway because they violate the due process clause. The motion contends that Mr. Becerra has “free rein to set prices unilaterally” without any administrative or judicial oversight.

According to Wednesday’s motion, lawyers for the Chamber argued that the Sixth Circuit Court of Appeals set a precedent in the case of Michigan Bell Telephone Co. v. Engler, stating that the government must offer procedural safeguards to ensure a company receives a fair return on investment when setting prices.

Instead, the lawyers contend that the government’s program does not provide such safeguards and imposes price caps that are well below a drug’s market value.

The lawsuit is one of several challenges to Medicare’s drug price negotiations, with Merck & Co. also filing a lawsuit claiming that the program grants excessive power to the HHS and imposes its preferred prices, deeming it a “sham.”

Under the IRA, the U.S. government is required to negotiate prices for specific prescription drugs starting in 2026 as part of the drug price negotiation program. Medicare price negotiations will occur throughout 2023 and 2024, with the established prices expected to take effect at the beginning of 2026.

Non-compliant drug manufacturers may face excise taxes and civil penalties. The Biden administration aims to save $25 billion annually by 2031 through these negotiations.

The Chamber of Commerce’s lawsuit comes ahead of the announcement of the first 10 drugs eligible for negotiation in September. Aside from the financial implications, the Chamber argues that even if its members could offset their financial losses by raising prices on other products, the resulting “loss of customer goodwill” would cause irreparable harm.

Government Defends Program

The Medicare drug price negotiation program focuses on high-spending drugs without generic or biosimilar competition. The program aims to address the concentration of Medicare Part D spending on a small number of brand-name drugs.

An analysis released by KFF on Wednesday revealed that the top-selling drugs under Medicare Part D accounted for nearly a quarter of gross spending in 2021, emphasizing the significant financial impact of a small number of products.

“Our analysis shows that Medicare Part D spending is highly concentrated among a small share of covered brand-name drugs, and that increases in gross spending on the 10 top-selling drugs have contributed to a substantial increase in overall Medicare drug spending in recent years,” the analysis states.

While the White House stands firm in its belief that the law supports Medicare price negotiation, the Chamber of Commerce asserts in its motion for an injunction that its lawsuit is likely to succeed based on the merits of its due process claim.

“For decades, the pharma lobby has blocked efforts to let Medicare negotiate lower drug costs,” White House press secretary Karine Jean-Pierre said during a press briefing on June 6. She criticized “Big Pharma” for trying to stop the president’s “historic action.”

“Any time profits of the pharmaceutical industry are challenged, they make claims about it hindering their ability to innovate. Not only are these arguments untrue, but the American people do not buy them,” she added.

The Medicare drug price negotiation program is also being challenged by lawsuits filed by Bristol Myers Squibb and PhRMA.

Merck & Co. argues that the requirement for companies to sign voluntary agreements conceding fair prices violates the First Amendment’s protection of free speech. The company also claims that the Fifth Amendment mandates “just compensation” when the federal government acquires property, contending that Medicare seeks to obtain prescription drugs without paying fair market value.

Mr. Becerra responded to Merck & Co.’s lawsuit last month, stating that the administration would “vigorously defend the President’s drug price negotiation law, which is already lowering health care costs for seniors and people with disabilities.”