Inside the Inflation Reduction Act’s upcoming legal battles

Nine plaintiffs – six pharma companies and two alliances of industry groups – have sued the government over the price negotiation provisions of the Inflation Reduction Act (IRA), employing at least seven distinct legal arguments.

To hear pharma executives speak – and I have, at ASCO, Bio, and Reuters Pharma – this law could threaten pharma’s business model and seriously curtail incentives for new drug development. But patient groups say that these companies are overstating the effect of a law that merely returns to the government a power it ought to have had for the last 20 years.

What’s in the bill?

The IRA allows for negotiation on 60 drugs, starting with 10 in 2026 and adding the other 50 over the following three years.

The Act puts a lot of guardrails on what drugs can be chosen for that lot. They must be among the 50 most expensive Part D drugs and the 50 most expensive Part B drugs. They can’t include small molecule drugs that have been on the market for under nine years or biologics on the market for less than 13 years. Orphan drugs and plasma-derived products are also excluded.

The law sets an upper limit for negotiated prices, but not a lower limit. It provides criteria that the Department of Health & Human Services (HHS) must consider in negotiating the price, but not a weighting for those criteria. And, crucially, the government wields a fairly large stick to encourage pharma companies to come to the table – threatening them with a 65% to 95% excise tax (which, due to the complex way the law is written, could amount to a 1,900% penalty) if they don’t charge the agreed-upon price.

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