US drugmakers want court to help them avoid negotiating prices with Medicare
Eight lawsuits are pending in courts across the US, setting up the possibility of a conflict that will push the issue to the Supreme Court
New York — Drugmakers challenging a Biden administration programme requiring them to negotiate with Medicare over the prices of selected costly drugs may not have a clear legal precedent on their side, but there are signs they could get a friendly hearing from the US Supreme Court, legal experts said.
Even before the administration announced the first 10 drugs for inclusion in the programme on Tuesday, drug companies and industry groups had sued the US Centers for Medicare and Medicaid Services (CMS) in an effort to derail it.
Eight lawsuits are pending in courts across the country, before liberal and conservative judges alike, setting up the possibility of a conflict that will push the issue to the nation’s top court.
Lawrence Gostin, a professor at Georgetown Law who has written publicly in support of the programme, said he believed the lawsuits had “very little merit” but could nonetheless be persuasive to the Supreme Court's conservative judges.
“The court has shown a considerable hostility to federal agency action, particularly when they are trying to do big things,” he said, pointing to the court's ruling last year limiting the Environmental Protection Agency's ability to regulate carbon emissions.
CMS is expected to soon begin the negotiations for lower prices on the 10 drugs that will take effect in 2026. The programme, part of the Inflation Reduction Act signed by Democratic President Joe Biden, aims to save $25bn per year on prescription medicines by 2031.
The drugs are some of the most lucrative on the market, including Bristol Myers Squibb’s blood thinner Eliquis, Novartis’s heart failure treatment Entresto and AstraZeneca’s diabetes drug Farxiga.
Those companies filed separate lawsuits against the administration, as have the US Chamber of Commerce and the leading drug industry group Pharmaceutical Research and Manufacturers of America (PhRMA).
While the cases feature differences in the legal arguments, all claim the programme gives the government power to effectively dictate the price, with drugmakers’ only recourse being pay prohibitive fines or stop taking part in Medicare and other government health programs.
The drug companies say that amounts to taking their property - their exclusive right to sell their patent-protected drugs - without just compensation, a violation of the US Constitution's Fifth Amendment.
Americans pay far more for prescription medicines than patients in other developed nations, where governments have long negotiated prices.
Though legal scholars said there was no exact precedent supporting either side’s position, the Supreme Court in recent years has upheld a strong view of property rights when interpreting the Fifth Amendment.
In 2015, the court struck down a Depression-era federal programme requiring raisin producers to set aside a portion of their harvest. And in 2021, it ruled that two California fruit companies could not be compelled by state law to allow union organisers on their property.
A key question in the drugmakers’ cases will be whether the government is forcing their hand.
James Blumstein, a university distinguished professor at Vanderbilt Law School who played a key role in Republican states’ successful challenge to the Affordable Care Act’s requirement to expand Medicaid health insurance for low-income people, said the government could attach conditions to participating in federal programmes, but with limits.
In the Affordable Care Act case, the Supreme Court found that the federal government overstepped in threatening to cut off all Medicaid funding for states that did not expand the programme, effectively commandeering state governments.
Drug companies might be able to argue that Medicare’s power in the market was so great that requiring the negotiation as a condition was similarly coercive, Blumstein said. He acknowledged that there was no perfect precedent, but suggested the companies could make an analogy with antitrust laws that restrict private companies.
“That would have to be developed through, shall we say, creative lawyering,” he said.
Others were more sceptical.
“It’s not as though the government is storming into warehouses and taking the drugs,” said Robin Feldman, a professor at University of California College of the Law, San Francisco, specialising in health issues. He called the illegal taking claim “a heavy lift”.
The drugmakers also say the law forces them to sign contracts stating the negotiated prices are “fair.” They say that violates their right to free speech under the First Amendment of the constitution by compelling them to parrot the government's claim.
The Biden administration has said nothing in the constitution prevents Medicare from negotiating drug prices.
The Supreme Court has upheld such compelled speech claims before, notably in a 2013 decision finding that nongovernmental organisations could not be forced to adopt an anti-prostitution stance to receive federal funding to combat Aids.
Blumstein said he believed compelled speech was the companies' strongest claim.
Feldman said it was weakened by the fact that the companies could still publicly say whatever they wished about the programme.
It could be some time before any of the cases reaches the Supreme Court. Only the Chamber of Commerce has sought a preliminary order halting the negotiations. Rulings in the drugmakers’ lawsuits are likely not to come until 2024 at the earliest.
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