In recent legal news, a judge in Texas threw out a lawsuit from big drug companies that were fighting against Medicare’s new rules on drug prices. The judge’s ruling, handed down on Monday, dealt a blow to Big Pharma’s efforts to contest the provisions created in the Inflation Reduction Act (IRA) of 2022.
Big Pharma vs. Inflation Reduction Act
But what happened? Well, a group of major drug companies, including Johnson & Johnson, AstraZeneca, and Bristol Myers Squibb, recently filed nine separate lawsuits claiming that the IRA rules on negotiating drug prices are unconstitutional.
New Rules Explained
The new rules require the Department of Health and Human Services to look for lower fixed prices for specific drugs in order to save the government money on treating Medicare patients.
Key Players
In the Texas case, there were three parties: the National Infusion Center Association (NICA); the Global Colon Cancer Association (GCCA); and PhRMA, a trade association for big pharma that represents Pfizer, GSK, Eli Lilly, and Sanofi.
Consequences for Non-Compliant Drug Companies
Under the IRA Act, pharmaceutical companies that choose not to participate in the program would be forced to pay hefty fines or risk losing their access to Medicare.
Medicare Coverage
Medicare provides coverage for 66 million Americans, the majority of whom are elderly and spend a significant amount of money on prescription drugs.
Hefty Fines
PhRMA, the Global Colon Cancer Association (GCCA), and NICA have argued that the program would unfairly slap huge fines on drug companies.
These fines could be as much as 185% to 1,900% of a drug’s price, depending on how long they don’t follow the rules.
Judge’s Ruling and Reasoning
Texas judge David Ezra dismissed the case because he said the court didn’t have the right to handle it.
This was because only one of the three groups filing the lawsuit, NICA, was in the same district as the court. So, the whole case was dismissed.
Biden’s Legal Team’s Stance
Biden’s legal team said NICA wasn’t the right group to bring these claims, and the judge agreed. For NICA to bring these complaints to court, they needed to go through a government review first.
Since they didn’t, the judge couldn’t hear their case, stating, “Therefore, NICA’s claims are dismissed without prejudice.”
Administrative Hurdles
With NICA out, the court said the remaining two groups, PhRMA and GCCA, were in the wrong place to fight this battle.
While the judge could’ve moved the case to a better-suited court, he didn’t, mainly because neither side suggested a better place.
Plus, neither PhRMA nor the cancer association had gone through all the necessary administrative steps before bringing the case to court.
Case Dismissed
The judge threw out the case “without prejudice,” meaning that it can be refiled in the future. A PhRMA spokesperson said they’re not happy with the decision and are thinking about their next steps.
Upholding the Inflation Reduction Act
This is a small win for the Biden administration, which is fighting various legal battles to defend these price negotiations laid out in the Inflation Reduction Act of 2022.
AstraZeneca’s Legal Challenge
Just last month, AstraZeneca had its turn in court in Delaware. They argued that Medicare negotiating drug prices violates their rights under the Fifth Amendment’s due process clause.
Fifth Amendment Concerns
The company said that these negotiations take away their “property rights in their drug products and their patent rights” without proper legal steps.
Judge’s Verdict
Judge Colm Connolly wasn’t buying it, arguing that they were free to continue operating as before, just without selling drugs to Medicare.
He said, “You’re free to do what you want; you may not make as much money.” The judge was later heard saying, “I don’t find their argument compelling.”
Government Negotiations Begin
In the meantime, while all these legal dramas are happening, the government has started its first round of negotiations for Medicare drug prices.
Medicare’s Strategy
But what does it mean for you? Well, for now, it means that Medicare is still working on bargaining for lower drug prices.
An August 2024 Deadline
They’ve already started talking about the prices for the first 10 drugs on their list, and they’ve got until August 2024 to figure it all out.
Lowering Drug Costs for Americans
The hope is that this will help bring down the cost of important meds for the average American citizen.
An Ongoing Battle
While this court decision might not seem like a big deal at first glance, it’s an important step in the ongoing battle over healthcare costs, and it’s something worth keeping an eye on as things continue to unfold.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
