Delaware Court Rules Inflation Reduction Act’s Drug Price Negotiation Program to Remain Intact

The US District Court of Delaware recently ruled against AstraZeneca in its case challenging the constitutionality of Medicare’s new Drug Price Negotiation Program (the Program). The court, in granting the federal government’s motion for summary judgment, found that AstraZeneca failed to prove that the Program jeopardizes its constitutional property rights and therefore did not have standing to challenge Medicare’s guidance on Program implementation.

In so ruling, the court stated that AstraZeneca has “no legitimate claim of entitlement to sell its drugs to the government at any price other than what the government is willing to pay,” thereby opening the door to what manufacturers speculate may result in future negative impacts to patients’ access to life-saving medicines and therapeutic innovation.     

THE COURT’S RULING

AstraZeneca challenged the constitutionality of the Program created by the Inflation Reduction Act (IRA) and the lawfulness of certain Centers for Medicare & Medicaid Services (CMS) guidance promulgated to implement the Program. Specifically, AstraZeneca asked the court to find the federal government’s definitions of a “qualifying single source drug” and “bona fide marketing” under the IRA to be contrary to law. 

The court ruled that AstraZeneca had not suffered, and would not soon suffer, injury as a result of CMS’s guidance and therefore lacked standing to sue.

The court explained that “AstraZeneca’s ‘desire’ or even ‘expectation’ to sell its drugs to the government at . . . higher prices . . . does not create a protected property interest. . . . And because AstraZeneca has no legitimate claim of entitlement to sell its drugs to the government at any price other than what the government is willing to pay, its due process claim fails as a matter of law.”

The court also rejected AstraZeneca’s claim that “participation in the Drug Price Negotiation Program is anything but voluntary,” concluding that “the [IRA] offers a powerful incentive—the opportunity to sell products to more than 49 million Medicare and Medicaid beneficiaries—to induce drug manufacturers to participate in the program and negotiate with CMS maximum fair prices for selected drugs.” The court continued, “[t]hat incentive is . . . a potential economic opportunity that AstraZeneca is free to accept or reject.”

The court similarly rejected AstraZeneca’s argument that it had standing because CMS’s guidance would decrease its incentives to look for other uses of Farxiga in other health conditions. The court concluded that “a loss or diminishment of an incentive to do something . . . is not a concrete injury.”

CLIENT CONSIDERATIONS

This is the second lawsuit challenging the Program in which a federal judge has ruled in favor of the government, and the decision by Chief Judge Colm Connolly comes just one day before drug manufacturers were expected to send initial counteroffers to CMS on a maximum fair price for their respective drugs. While seven additional lawsuits are pending in district court litigation, pharmaceutical manufacturers are expected to proceed in a manner consistent with Program requirements.

HOW WE CAN HELP

Morgan Lewis guides and provides strategic counseling to pharmaceutical manufacturers navigating complex government pricing and price reporting matters. Morgan Lewis lawyers can assist manufacturers in understanding and remaining compliant with all such Program requirements.