Federal Judge Tosses PhRMA Suit on Medicare Price Negotiations

AUSTIN, Texas — A federal judge in Texas on Monday dismissed a PhRMA lawsuit challenging the Biden administration’s new Medicare drug price negotiation program, a major win for the White House, though at least eight other challenges to the initiative are still pending in other courts.

The administration unveiled its plan to cut prescription drug prices in September 2021.

The 29-page plan, released through the Department of Health and Human Services, enabled the federal government to negotiate drug prices in Medicare and pass those lower prices on to consumers.

It would also permit drug importation from Canada, limit the ability of drug companies to raise prices on existing drugs and put a cap on out-of-pocket spending for the Medicare prescription drug benefit.

In June 2023, PhRMA, the leading trade organization representing companies in the U.S. pharmaceutical industry, and medical groups sued the administration in the federal court in Texas.

They alleged the drug price negotiation program violates the separation of powers doctrine, the Fifth Amendment’s due process clause, and the Eighth Amendment’s prohibition on excessive fines.

The Justice Department, acting on behalf of HHS, asked the court to dismiss the case, arguing that the National Infusion Center Association — the only one of the three plaintiffs actually located in Texas — lacked standing to sue because it didn’t represent anyone who sells or manufactures prescription drugs.

On Monday, U.S. District Judge David Alan Ezra agreed, and because NICA was the only party located in Texas, the entire lawsuit was tossed.

Ezra wrote that NICA’s claims fall under the Medicare Act and didn’t satisfy the jurisdictional prerequisites.

“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,” Ezra wrote. “Therefore, NICA’s claims are dismissed without prejudice.”

In his 14-page ruling, Ezra goes on to cite U.S. Supreme Court and U.S. Court of Appeals for the Fifth Circuit precedent, in which both courts “held that federal question jurisdiction bars claims that ‘arise under’ the Medicare Act, even when the claim is for reimbursement or is a constitutional challenge.”

While there are exceptions to the rule, such as when “channeling a claim through the agency would result in the ‘complete preclusion of judicial review,’” Ezra said such was not the case here.

The plaintiffs, he wrote, “have not shown that there is ‘no way of having their claims reviewed[,]’ either legally or practically.

“While channeling [a request for administrative review through an agency] may cause a time delay, delay-related hardships do not justify an exception,” Ezra said.

In a statement, White House spokesperson Karine Jean-Pierre said the court’s decision “is an important step in this administration’s defense of the law.” 

“Despite Big Pharma’s attempts to block prescription drug negotiation, the Centers for Medicare and Medicaid Services is moving forward with their critical work to negotiate for lower drug prices for the first 10 drugs selected for the negotiation program,” she continued. 

“Millions of seniors take these drugs every year for conditions ranging from diabetes to heart disease, blood cancers, Crohn’s disease, and more — and some pay nearly $6,500 per year out of their own pockets for one drug alone,” Jean-Pierre said.

“Americans shouldn’t be forced to pay two to three times more for their prescription drugs than other developed nations. President Biden and this administration will continue this essential work to lower health care costs for millions of seniors and their families,” she added.

A spokeswoman for PhRMA said the group is disappointed with the court’s decision and is weighing its next legal steps.

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