Medicare Drug Price Negotiation Program Steadily Progressing Despite Lawsuits

The Biden Administration’s Inflation Reduction Act (IRA)’s Medicare drug price negotiation program, which allows Medicare to directly negotiate prices with drugmakers, has faced several legal challenges.

Since June 2023, several drugmakers (and other interested parties) such as Merck[1] and AstraZeneca[2] launched lawsuits challenging the program under various legal theories, including unconstitutionality under the Fifth Amendment and violation of the Administrative Procedure Act. The AstraZeneca suit ended after the court granted summary judgment in favor of the administration in early March.[3] AstraZeneca has not yet filed an appeal. The drug price negotiation program has now initially survived three legal challenges brought against it, some of which are under appeal, and other lawsuits remain ongoing.[4]

Despite pending legal challenges, the drug price negotiation program of the IRA appears to be continuing on schedule. In August 2023, the Centers for Medicare & Medicaid Services announced the first 10 drugs selected for negotiation.[5] The Biden administration sent its initial offers to the manufacturers of the 10 selected drugs on February 1, 2024.[6] While the offers were confidential, pharmaceutical executives’ reactions were surprisingly positive, though this may have been a strategy to keep investors feeling confident.[7] All of the drugmakers responded with counteroffers by their March 1, 2024 deadline, and the Biden administration announced on Tuesday, April 2, 2024 that it had responded to the drugmakers’ counters.[8]

The offer/counteroffer process is scheduled to continue until August 1, 2024, when final prices will be announced.  The negotiated prices will not go into effect until 2026.[9]  Litigation is also expected to continue. Recently, some of the litigants have joined forces, presenting arguments together regarding Medicare’s authority to negotiate drug prices at district court hearing in New Jersey.[10] Many will continue to watch as the IRA’s Medicare drug price negotiation program, and its legal challenges, unfold.