PhRMA Sues Administration Over Medicare Drug Price Negotiation Rules

WASHINGTON — PhRMA, the pharmaceutical industry’s largest lobbying group, sued the Biden administration on Wednesday asserting provisions of the Inflation Reduction Act that allow Medicare to start negotiating the prices of certain drugs are unconstitutional.

The 59-page complaint, in which PhRMA was joined by the Global Colon Cancer Association and the National Infusion Center Association, was filed in the U.S. District Court for the Western District of Texas.

It is the fourth such suit filed in recent weeks, followed by litigation filed by Merck, in the federal court here in Washington, by Bristol Myers in New Jersey, and by the U.S. Chamber of Commerce in Ohio.

In the latest lawsuit PhRMA and its fellow plaintiffs contend the price setting provisions run afoul of the U.S. Constitution in three distinct ways.

First, they claim, by passing the provisions, Congress impermissibly delegated broad authority to the U.S. Dept. of Health and Human Services, with no meaningful constraints on the agency’s new price-setting authority.

Further, they claim that they were denied any opportunity for input on how the price-setting provisions would be implemented and afforded no opportunity for judicial or administrative review after decisions on how the new rules are implemented have been made.

This, the plaintiffs maintain, is a clear violation of their due process rights.

Finally, they assert that fines imposed for noncompliance with the drug pricing provisions amount to a “staggering” and “severe” penalty that violates the Eighth Amendment’s excessive fines clause.

“Imposed each day that a manufacturer has not agreed to ‘negotiate’ it increases swiftly to 1,900% of a drug’s total sales revenues,” the plaintiffs say.

“The price setting scheme in the Inflation Reduction Act is bad policy that threatens continued research and development and patients’ access to medicines,” PhRMA President and CEO Stephen J. Ubl said in a written statement announcing the lawsuit. 

“It also violates the U.S. Constitution because it includes barriers to transparency and accountability, hands the executive branch unfettered discretion to set the price of medicines in Medicare and relies on an absurd enforcement mechanism to force compliance,” he added. 

The Centers for Medicare & Medicaid Services is currently scheduled to publish the list of the first 10 Medicare Part D drugs selected for negotiations on Sept. 1.

The negotiated maximum prices are then to be published a year later, on Sept. 1, 2024, and will go into effect on Jan. 1, 2026.

In future years, CMS will select for negotiation up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that, as outlined in the Inflation Reduction Act.

PhRMA and its fellow plaintiffs have said they are suing now so the courts can prevent undue harm to their members and their members’ customers before the process is too far along.

“NICA supports lower costs for patients, but infusion providers have no control over setting the prices of the medications they administer,” said the association’s chief executive officer, Brian Nyquist, in a written statement.

“NICA’s members have an interest in being adequately reimbursed for the treatments they provide, and they have an interest in continuing to operate their health care business,” he said. “The government price setting provisions in the IRA may inadvertently set reimbursement below acquisition cost, exacerbating existing consolidation trends and reducing our nation’s community-based infusion capacity. 

“This would leave patients with the hospital as their only option — which is by far the most expensive setting. A recent analysis projected an almost 50% average reduction to add-on payments across all office-based infusion centers because of the price setting provisions, which is an overnight drop in income few businesses could survive,” Nyquist said.

The plaintiffs want the court to declare the provisions unconstitutional and to permanently enjoin the government from forcing them to negotiate drug prices.

A spokeswoman for the Department of Health and Human Services, which oversees CMS, said the department plans to vigorously defend the act’s drug price negotiation provisions.

Meanwhile, on Capitol Hill, Rep. Frank Pallone Jr., D-N.J., ranking member of the House Energy and Commerce Committee, issued a statement in which he accused PhRMA in particular of caring “far more about profits than people.”

“While Americans are being forced to skip doses to stretch their prescriptions, one of Washington’s wealthiest lobby groups is going to court to attempt to prevent Medicare from finally being able to negotiate lower prices for seniors,” Pallone said. “It’s shameful, but PhRMA has never had a problem with its companies charging Americans two, five, or even ten times more for the exact same drugs than they charge in other countries. They are ripping off Americans who are struggling to pay for the lifesaving drugs they need and Democrats are not going to let them get away with it.  

“This lawsuit won’t intimidate us or deter Democrats’ ongoing effort to rein in the soaring cost of prescription drugs to make them more affordable for all Americans,” the representative continued. “Democrats are more than ready to defend this historic accomplishment in court, which I’m confident will withstand this ridiculous lawsuit. The only thing this lawsuit will accomplish is hardening Democrats’ resolve to pass legislation to extend Medicare’s negotiated prices to the commercial market.”

Dan can be reached at [email protected] and @DanMcCue