Judge kicks out another Medicare price negotiation challenge

A Connecticut federal judge has sided with the US Department of Health and Human Services (HHS) in Boehringer Ingelheim's challenge to Medicare’s drug price negotiation programme, rejecting the company’s position.

Judge Michael Shea denied all of Boehringer's claims that the Medicare negotiation programme, the key policy in President Biden’s flagship Inflation Reduction Act (IRA), is unconstitutional.

In his order, Judge Shea said that Boehringer’s participation in Medicare is voluntary, albeit with “considerable economic incentive,” adding that the federal government is entitled to place conditions on companies who benefit from its programmes.

The verdict continues a run of setbacks for the pharma industry in its efforts to fight the programme, coming after defeats in court for Bristol-Myers Squibb and Johnson & Johnson, AstraZeneca, the Pharmaceutical Research and Manufacturers of America (PhRMA) trade organisation, and the US Chamber of Commerce.

Boehringer’s lawsuit has been brought on similar grounds to the others, including that Medicare is violating the due process and takings clauses of the Fifth Amendment – essentially that allowing Medicare to negotiate the prices of their drugs amounted to illegal ‘physical taking’ of their property – as well as the First Amendment right to free speech by making them sign agreements that state the prices being set are fair.

The suit also claimed that the negotiations violate the Eighth Amendment because they amount to an excise tax designed to force pharma manufacturers to accept the government-mandated price of medicines.

Overall, the assertion is that there is no negotiation, but rather mandatory price-setting by the government that is backed up by punitive fines if companies do not comply. Under the IRA, companies that refuse to reduce prices risk an excise tax starting at 65% of US sales of a product, increasing by 10% every quarter until it reaches a maximum of 95%.

Boehringer filed its challenge last August after it became clear that its big-selling diabetes treatment Jardiance (empagliflozin) – sold with Eli Lilly – was being included among the first 10 medicines subject to the first round of Medicare pricing negotiations.

A few weeks later, the company publicly committed to entering the first round of Medicare price talks. After the negotiation period, the new prices will be announced on 1st September 2024 and will go into effect on 1st January 2026 – assuming the pharma industry continues to be unsuccessful in its legal challenges.