Activists protest prescription drug pricing in front of the U.S. Department of Health and Human Services (HHS) building on October 6, 2022 in Washington, DC.
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A federal judge on Monday dismissed a lawsuit brought by a major pharmaceutical industry lobbying group and two other organizations challenging Medicare's new powers to negotiate prices for expensive prescription drugs.
The decision is an early victory for the Biden administration as it grapples with a series of other legal challenges that drug makers have filed against Medicare drug price negotiations. The Inflation Reduction Act's key policy aims to make medicines more affordable for seniors and could reduce pharmaceutical industry profits.
The judge's ruling will not end the legal battle over the policy, which could end up in the Supreme Court. Medicare issued its initial price offers to manufacturers for the first 10 drugs subject to talks earlier this month, and final negotiated prices will take effect in 2026.
U.S. Judge David Ezra of the Western District of Texas sided with the Biden administration in dismissing the lawsuit from Pharmaceutical Research and Manufacturers of America, or PhRMA, the Global Colon Cancer Association and the National Infusion Center Association, which argued that the conversations on prices were unconstitutional.
In a 14-page ruling, Ezra specifically dismissed the National Infusion Center Association, or NICA, in the case, arguing that the court does not have jurisdiction over the group's legal challenge. She wrote that NICA's claims are governed by the Medicare Act and could only be heard by a court after an administrative review by the federal agency.
Ezra dismissed the rest of the case since NICA is the only plaintiff residing in the district.
PhRMA is “disappointed with the court's decision, which does not address the merits of our lawsuit, and we are weighing our next legal steps,” spokesperson Nicole Longo told CNBC in a statement. PhRMA represents many of the world's largest drug manufacturers, including Eli Lilly, Pfizer and Johnson and Johnson.
But PhRMA and the other two organizations could appeal the decision. Legal experts say the pharmaceutical industry hopes to get conflicting rulings from federal appeals courts, which could speed the process all the way to the Supreme Court.
A list of major companies with drugs selected for negotiations, including J&J, merckand Bristol-Myers Squibb, have filed separate lawsuits challenging the constitutionality of the price negotiations. Those cases are still pending.
Notably, a federal judge in Ohio issued a ruling in September denying a preliminary injunction sought by the Chamber of Commerce, one of the country's largest lobbying groups. which aimed to block price talks before October 1.
PhRMA, NICA and the World Colon Cancer Association filed their lawsuit in June, alleging that the negotiations delegate too much authority to the Department of Health and Human Services.
The lawsuit also argued that the price negotiations violate the Eighth Amendment because they include a “crippling” excise tax intended to force drug manufacturers to accept government-dictated drug prices.
The groups also argued that the price negotiations violate due process by denying drug companies and the public a say in how Medicare negotiations will be implemented.
Justice Department attorneys on behalf of the Department of Health and Human Services responded that NICA, the only Texas-based plaintiff, lacked standing because it does not manufacture or sell prescription drugs that could be subject to the negotiations.
