Could pharma’s legal attack on the IRA succeed in killing price negotiations?


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Medicare’s newfound mandate to negotiate drug prices is well underway with the first wave of 10 drugs and their newly proposed prices bouncing between drugmakers and the government. 

HHS sent out its proposed prices for the first 10 drugs on Feb. 1 and manufacturers responded this week with counter offers, President Joe Biden said on March 4. 

The negotiations were authorized in the Inflation Reduction Act, which sparked a flurry of legal challenges from the pharma industry. Even as the cases make their way through the courts, pharma companies are in the thick of the first negotiations, which are currently set to become effective in 2026. 

As with many policy upsets in the past, the legal attack is just par for the course.

“There’s always criticism of CMS’ implementation of any statute, irrespective of the topic or how it’s done,” said Judith Waltz, partner at Foley & Lardner. Waltz’s specialty includes Medicare and Medicaid compliance and she previously worked as counsel at the Department of Health and Human Services.

But for the industry there is one very clear goal on the table: to block price negotiations from going into effect. 

Diverging arguments

Nearly a dozen lawsuits have been launched by pharma companies and industry groups containing diverging arguments against price negotiations in courts spread across the U.S. 

A common cry is that if prices are controlled, R&D and innovation will be stifled and the incentive for investing in new drugs will be eliminated. Waltz likens the response to new financial disclosure requirements in the open payments program.

“I don’t want to say pharma is wrong in pursuing this, but in terms of how I anticipate their success I would compare it to when the open payments came out,” she said. “This is where manufacturers have to report dinners and all that kind of stuff for doctors and academic medical institutions. I heard the same arguments: Innovation is going to be killed because the doctors will not want anybody to know what they’re getting paid.”

Ultimately, the argument “blew over,” she said, and open payments were enacted in 2013.

Other lawsuits around the country claim the negotiation efforts are unconstitutional.

“They have spread these cases across the country, which is a smart strategy because you may end up with [a judge who] is more sympathetic or sees the law in a different way,” Waltz said. 

However, pharma’s legal record so far is 0-3. Most recently, AstraZeneca’s case was tossed by a federal district court judge in Delaware, dealing another blow to the legal strategy. The case argued that the price negotiations were unconstitutional and violated pharma’s protected property interest. 

AstraZeneca’s Farxiga, which treats chronic kidney disease, type 2 diabetes and heart failure, was targeted in the first wave of drug price negotiations. The first 10 drugs were selected from the top 50 drugs the Centers for Medicare and Medicaid Services spent the most on under Medicare Part D that didn’t have generic competition. All told, Medicare Part D spent $3.3 billion on Farxiga from June 2022 through May 2023.Sales for Farxiga, which has been a blockbuster since its approval in 2014 and expanded into new indications, reached nearly $6 billion in fiscal year 2023, according to the pharma’s latest financial results. 


“Having one case tossed is not a good sign for the rest of them, but it’s also not necessarily a bad sign.”

Judith Waltz

Partner, Foley & Lardner


AstraZeneca’s case was the third to get thrown out in the litigation saga, following another suit that was tossed by a federal judge in Western District of Texas. In that case, which was brought by the lobbyist group PhRMA, the Global Colon Cancer Association and the National Infusion Center Association, argued the negotiations were unconstitutional based on potentially excessive fines. But the case was tossed because the judge decided the court lacked jurisdiction on the issue. Another lawsuit in Ohio that sought an injunction to stop the negotiation program on due process grounds was rejected in September. 



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