The U.S. Chamber of Commerce and three state and local affiliates are asking a federal court to strike down the part of the Inflation Reduction Act that lets Medicare negotiate “maximum fair prices” (MFPs) for some expensive, single-source drugs, arguing that it imposes unconstitutional price controls.
It is the second such lawsuit. Drug manufacturer Merck filed the first on June 6 in federal district court in Washington, D.C. The business groups filed theirs on June 9 in federal district court in Dayton, Ohio.
The U.S. Centers for Medicaid & Medicare Services said in March that under the law manufacturers must give 340B covered entities access to a drug’s MFP if the drug’s 340B ceiling price is higher. Guidance to implement that requirement has not been issued yet. MFPs on the first 10 drugs picked for negotiation are due to be applicable starting Jan. 1, 2024.
The new law created an unlawful price-setting scheme rather than a fair negotiation process, the U.S. Chamber of Commerce, the Ohio and Michigan Chambers of Commerce, and the Dayton Area Chamber of Commerce say.
“The IRA uses the term ‘negotiation’ to mislead the public into believing that a voluntary and fair bargaining process will take place,” they told the court. Instead, the law is “an unprecedented, one-sided regime that forces manufacturers to sell drugs at government-set prices.”
The law violates the U.S. Constitution’s separation of powers doctrine, exceeds Congress’s enumerated powers, denies drug makers’ Fifth Amendment due process and First Amendment free speech rights, and imposes excessive fines in violation of the Eighth Amendment, the plaintiffs told the court. They asked the court to enjoin the law’s drug price negotiation provisions.
“When the government caps prices, it caps innovation and endangers access to better treatments—harming patients the most,” the U.S. Chamber of Commerce said in a statement issued the day the suit was filed. “The new IRA provisions establish an artificial and arbitrary system for devising price caps that will jeopardize medical breakthroughs for individuals with life-threatening and chronic illnesses.”
The group said the law’s impact is already apparent, with drug maker Alnylam stopping research on a drug to treat a rare eye disease, while Novartis, Genentech and Eli Lilly say IRA’s drug pricing provisions have hurt their cancer research efforts.
In their complaint, the chambers of commerce groups said that Congress, in enacting the law, failed to provide protections including legal standards to keep government power in check, and procedures to provide adequate opportunities for public input and for judicial review.
“Such protections are especially important when the government is acting simultaneously as both a regulator and in its own self-interest as the dominant market participant,” the complaint said.
What’s more, “The IRA does not provide for anything that could conceivably be called a negotiation,” the plaintiffs argued. Rather, drug makers are compelled to agree with a government-set MFPs or face fines in the form of excise taxes, which the plaintiffs said are “up to 19 times the gross sales of the drug.”
“The statute seeks to upend the nation’s healthcare markets by granting an administrative agency, for the first time, unfettered discretion to impose arbitrary prices on an expanding roster of dozens of prescription drugs that are among the most important to patient care,” the complaint said.
Further, if drug makers disagree with the government’s set prices, it will hurt their ability to negotiate different prices in the private market, they groups said. Withdrawing all of a manufacturer’s drug from federal health care programs in order to avoid being subject to MFPs “is not a viable option,” they said.
Biden Administration Response
According to a report from Reuters, the Biden administration believes it will save taxpayers $25 billion annually by 2031 by allowing Medicare to bargain on drug prices.
White House press secretary Karine Jean-Pierre responded last week to Merck’s suit. “There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices,” she said.