Pharmaceutical Giants Challenge the U.S.'s First Mandatory Drug Price Negotiation Law, Claiming $6 Billion!

Legal advisers for AstraZeneca, Bristol Myers Squibb and Johnson & Johnson filed a petition on Wednesday with the federal appeals court in Philadelphia to rehear a lawsuit The lawsuit challenges the first law in US history to force drug companies to negotiate drug prices with Medicare, the government insurance program. The health insurance program benefits about 66 million Americans.

In the initial negotiations, Astrazeneca's diabetes drug Farxiga, Bristol-Myers Sfubb's anticoagulant Eliquis and Janssen's anticoagulant Xarelto were selected as among 10 drugs subject to price negotiations, and their prices were subsequently reduced by 56% to 68%.

The new pricing, which would begin in 2026, is expected to save Medicare about $6 billion in the first year. The drug companies argue that the program, part of the Inflation Reduction Act, constitutes a gratuitous expropriation of their property in violation of the U.S. Constitution. Earlier, federal district courts in Delaware and New Jersey dismissed the companies' lawsuits.

Yaakov Roth of Jones Day, representing Bristol-Myers, argued in arguments Wednesday to a three-judge panel of the 3rd U.S. Circuit Court of Appeals that the law does not give drug companies leeway to negotiate and instead threatens them with steep fines or withdrawal from Medicare. Bring the company to heel. Medicare accounts for almost half of the prescription drug market.

Catherine Padhi, a lawyer for the Justice Department, responded that the government had the power to use its purchasing power to achieve its goals and offered the plaintiffs "a very favorable deal."

Mr. Janssen's lawyer, Kevin King of Covington & Burling, argued that the law violated the company's First Amendment right to free speech by requiring it to accept the "highest fair price," even if it deemed the price unfair.

"The government cannot force regulated parties to express the government's preferred message," King said.

Padhi countered that "maximum fair price" is a "statutory term" and does not involve a subjective value judgment.

The panel, composed of circuit judges Thomas Hardiman, Peter Phipps and Arianna Freeman, did not explicitly indicate its intention to rule. During questioning, Judge Hardiman suggested that the plan could be seen as the government using its "leverage" to force drugmakers to give up their property. But he also noted that drugmakers were trying to enjoy the benefits of both the government's "massive purchasing power" and "free market pricing" while the program was designed to stop "the federal budget deficit from spiraling out of control."

So far, drugmakers' legal challenges to pricing plans have been largely unsuccessful. But in September of this year, The Fifth U.S. Circuit Court of Appeals in Texas reinstated a lawsuit brought by the Pharmaceutical Research and Manufacturers of America, the largest U.S. pharmaceutical industry lobbying group, and other groups.

The cases included Astrazeneca v. Becerra (case No. 24-1819) and Myers Squibb et al. V. Becerra (case No. 24-1820), both before the United States Court of Appeals for the Third Circuit.

Astrazeneca was represented by Kate Stetson of Hogan Lovells; Bristol-myers was represented by Yaakov Roth of Jones Day; Janssen was represented by attorney Kevin King.