ANALYSIS: Drug Price Fights Still Have Shot After One Suit Axed

Drugmakers still have a chance to unravel the Biden administration’s drug price negotiation program despite a blow to one legal challenge.

A federal district court in Texas Feb. 12 dismissed a lawsuit brought by the National Infusion Center Association (NICA) and other industry groups for lack of jurisdiction. NICA’s claims revolved around Medicare reimbursement for providers, and that led to its downfall.

The eight other lawsuits winding their way through the courts don’t involve providers, so even if they hit a roadblock, it likely won’t be for the same reason.

Provider Reimbursement

The lawsuits challenge a provision of the Biden administration’s landmark Inflation Reduction Act, which for the first time allows the federal government to negotiate directly with drug manufacturers for lower prices. The complaints all allege various violations of the US Constitution.

The court in the NICA case held that the plaintiffs’ claims arise under the Medicare Act—which means that administrative remedies must be exhausted before going to court. Even though NICA alleged constitutional claims (separation of powers, excessive fines, and due process), the court found that the allegations are intertwined with its members’ ability to be properly reimbursed by Medicare.

As NICA’s complaint says, once drug negotiations kick in for provider-administered drugs, “reimbursement rates for a significant and growing number of the treatments NICA members administer will be based on the IRA’s ‘maximum fair price,’ and revenues will fall precipitously.” NICA represents community-based infusion providers.

Infusion providers dissatisfied with Medicare payments following any drug price negotiation would first have to appeal to the agency, according to the court’s ruling. If they’re unhappy with the ensuing administrative decision, they could sue in federal court. Negotiated prices for provider-administered drugs, however, may not take effect until 2028.

The court cited the US Supreme Court’s 2000 decision in Shalala v. Illinois Council on Long Term Care Inc., which held that administrative remedies must be exhausted before presenting a claim in federal court when both the standing and substantive basis for the claim is the Medicare Act.

Medicare reimbursement is at the heart of NICA’s claims because otherwise, NICA wouldn’t have a reason to participate in the lawsuit. Counsel for the federal government noted in their motion to dismiss that NICA’s “participation in this lawsuit rests entirely on the theory that they will (eventually) receive unlawfully low Medicare Part B reimbursements because of a future shift in reimbursement methodology under a provision of the Inflation Reduction Act that amends the Medicare Act.”

Different Focus

The plaintiffs in the remaining eight legal challenges are AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb Co., Johnson & Johnson, Merck & Co., Novartis AG, Novo Nordisk, and the US Chamber of Commerce.

The cases differ from NICA’s because, since they were filed mostly by drugmakers, they don’t focus on provider reimbursements.

It remains to be seen whether a court will find that these drugmaker claims also arise under the Medicare Act. But given the uniqueness of the NICA case, the Biden administration shouldn’t assume a guaranteed win in the others.

Bloomberg Law subscribers can find related content on our In Focus: Drug Pricing page.

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