Insulin Makers Facing Price Talks Appear Poised to File Lawsuits

Insulin makers whose drugs landed on Medicare’s price negotiations list could be the next to file lawsuits to block the program, even as US officials maintain they’re following the strict requirements of the law when choosing the drugs.

The final drug on Medicare’s top 10 list released Aug. 29 includes three versions each of NovoLog and Fiasp, insulin products made by Novo Nordisk A/S. They accounted for $2.6 billion in total Medicare Part D spending between June 2022 and May 2023, according to agency data.

Six drugmakers, including Merck & Co. and Bristol-Myers Squibb Co., are already challenging the Inflation Reduction Act’s drug price negotiation program in court. They make several constitutional arguments, and the two most recent lawsuits from AstraZeneca Plc and Boehringer Ingelheim GmbH also include statutory challenges to the Medicare agency’s guidance under the Administrative Procedure Act.

The grouping of six insulin products together prompted additional questions on the Biden administration’s implementation procedures, making additional litigation likely from Novo Nordisk and other manufacturers who have not yet entered the fray, said Zachary Baron, an associate director of the Health Policy and the Law Initiative at Georgetown’s O’Neill Institute.

“I would be surprised if we did not see any new lawsuits being filed in light of HHS’s announcement,” Baron said.

Novo Nordisk A/S said in a statement the company “will explore all options” after Medicare’s release of the negotiated drugs and “we will be determining next steps toward addressing those important initiatives.” A company spokesperson declined to comment on whether “all options” includes litigation and referred back to Tuesday’s statement.

Graphic: Jonathan Hurtarte/Bloomberg Law

Grouping Insulins

Critics questioned the decision to bundle a half-dozen insulin products from two brands into a single category.

“That seemed like a sort of policy outcome in search of a rationale by grouping those two insulins together,” said Scott Gottlieb, a former Food and Drug Administration commissioner.

Fiasp came out after NovoLog and the newer insulin includes vitamin B for faster absorption and amino acids for stability.

Gottlieb expressed skepticism about whether those different ingredients met the letter of the guidance. He said the Centers for Medicare & Medicaid Services should make those decisions in a very objective fashion, with clearly established criteria. “FDA would never make a decision in this kind of a fog. And so it does feel a lot like they contorted those insulins into the scope of the list by grouping enough of them together.”

Drugmakers already decried the Medicare agency’s decision to lump all drugs together with the same active ingredient, instead of separating them out by doses.

But John Barkett, who worked on the drug pricing legislation for the White House Domestic Policy Council, rejected the notion that the CMS is somehow massaging the criteria so it can negotiate prices on drugs like insulin.

“That’s not how CMS makes decisions, especially when the policy in question will so obviously affect specific, identifiable stakeholders. They will have made sure their statutory interpretations follow from the statute, align with precedent, and gain approval of their General Counsel,” Barkett said in an email Wednesday.

CMS Administrator Chiquita Brooks-LaSure also pushed back on claims the selection was arbitrary or political in an interview Tuesday with Bloomberg News. “The law is very prescriptive about the way that we were to determine which drugs would be selected for negotiation,” Brooks La-Sure said.

A senior administration also said during a media briefing: “Insulin is a covered Part D drug, and so it is brought in under the process.”

Inmaculada Hernandez, a professor and pharmaceutical health services researcher at the University of California, San Diego, said she wasn’t surprised insulin made the list. The decision to package insulin together “is consistent with the guidance and I think it’s a good move to avoid manufacturers gaming the system,” Hernandez said.

Lowering Medicare Spending

The IRA required the CMS to publish by Sept. 1 the first 10 Part D products facing negotiated prices in 2026. But drug pricing is part of a larger redesign of Medicare’s prescription drug benefit under Part D. Other changes include a $2,000 cap on out-of-pocket costs that starts in 2025 and a $35 per month cap on insulin that took effect Jan. 1.

Insulin prices for Medicare beneficiaries may drop even lower than $35 because of price negotiations, a senior Biden administration official said Tuesday, noting that some plans already offer a copay lower than $35.

Alice Chen, an associate professor of public policy at the University of Southern California, whose research includes how regulation affects pharmaceutical markets, said the cap on insulin spending may be more effective in lowering beneficiary out-of-pocket spending relative to this negotiated price—although it depends on the final price after negotiations.

“The target for negotiation really isn’t only about lowering beneficiaries’ out-of-pocket cost spending, it’s about lowering total drug spending,” she said. The cap and negotiated insulin prices are “targeting slightly different things.”

Kenneth E. Thorpe, a health policy professor at Emory University and deputy assistant health secretary during the Clinton administration, said it’s misleading to say drug negotiations will benefit seniors.

“This is a pure budget exercise that saves Medicare money, which is fine, but let’s just call it what it is,” he said. Thorpe said there needs to be a more holistic approach to reducing costs per capita across the health-care system while improving outcomes.

But Stacie B. Dusetzina, a health policy professor at Vanderbilt University, whose specialties include prescription drug costs, said lower prices will help all Medicare beneficiaries.

“The savings that are generated through this negotiation are paying for an expansion of the Medicare benefit, so that everybody in Medicare Part D will get some benefits from this,” she said. “The good news for people is that even if their drug isn’t on this list, that they should see price relief and lower prices, or lower total spending, and especially true for people who have spending that’s going to be $2,000 or more.”

—With assistance from John Tozzi