Drug price negotiations, legal battles set to ramp up: What to expect

The fight over Medicare drug price negotiation picked back up this week with oral arguments in AstraZeneca’s lawsuit and the federal government sending out its first offers for a maximum fair price to manufacturers.

AstraZeneca gave its first oral arguments in the District Court of Delaware on Wednesday. Like other companies and pharmaceutical entities, the drugmaker has alleged a host of constitutional violations resulting from the Medicare drug price negotiation program established by the Inflation Reduction Act.

U.S. District Judge Colm Connolly, chief judge of the District of Delaware, expressed skepticism over AstraZeneca’s argument Wednesday, saying he didn’t understand how the company would lose property due to taking part in negotiations as it claimed, according to Stat.

Connolly reportedly reiterated the companies are not required to sell to Medicare, one of the federal government’s key arguments in the heap of lawsuits challenging negotiations. The federal judge told AstraZeneca’s lawyers he did not find their argument “compelling,” Stat reported.

Farxiga — a medication AstraZeneca developed with Bristol Myers Squibb — was chosen as one of the first 10 drugs for which Medicare would negotiate prices. Farxiga is used to treat diabetes, heart failure and chronic kidney diseases.

The company has specifically alleged the government is taking its “protected property interest without following constitutionally sufficient procedures,” thus violating its Fifth Amendment rights.

“It’s just a clear attempt by AstraZeneca to protect their profits at the expense of the people who rely on that medication,” Bailey Reavis, manager of federal relations at the consumer health nonprofit Families USA, said.

“And we think that any attempts from them to stop, lessen, roll back the negotiation process through these legal attempts are just going to allow them to continue to price gouge the Medicare program,” Reavis added, noting that Farxiga alone had cost Medicare $3.3 billion last year.

AstraZeneca did not respond to requests for comment at the time of writing.

All of the manufacturers whose products were named last year ultimately agreed to negotiate with the Centers for Medicare and Medicaid Services (CMS) by the Oct. 1 deadline, despite initial protests. Now, these companies can expect to receive their first offers on what the federal government believes is a fair maximum price.

The administration has said it will not provide specifics on what the negotiation process, including what the initial offers, will be. The only indication from the government of what the offers might’ve looked like will be the final maximum fair price that is reached later this year. However, companies may choose to disclose the offers they receive.

“Negotiating drug prices directly with manufacturers is not a new concept. Other health care agencies across the U.S. government, such as the Department of Veterans Affairs, have done this for decades,” Health and Human Services Secretary Xavier Becerra said in a press briefing Wednesday.

During the briefing, a senior administration official pushed back at the claim that price negotiations will deter research and development for new drugs.

“The president has been very clear that when drug companies invent new therapies that are meaningful, critical improvements, they absolutely should have the opportunity to earn a fair return on their investments and benefit from the medical breakthroughs that they are bringing to the American people,” the official said.

“At the same time, what we are talking about here is negotiating the price of prescription drugs that have been on the market for years, and many of them long past the time when they should have become eligible,” they added. “We know that the pharmaceutical industry spends more on stock buybacks and dividends than it does on R&D.”

As Becerra described it, the offer Thursday kicks off a good faith “back-and-forth” between the federal government and manufacturers. The pharmaceutical industry made it clear beforehand that it disagrees.

Companies will have 30 days — until March 2 — to respond to the offers, either accepting the proposed price or issuing a counteroffer. The CMS will have three meetings with manufacturers until negotiations are scheduled to end on August 1.

Alex Schriver, senior vice president of public affairs for the pharmaceutical trade group PhRMA, decried the negotiation process as an “exercise to win political points on the campaign trail.”

“Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used,” Schriver said in a statement. “This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone.”

Legal experts remain dubious that the claims made by pharmaceutical stakeholders will hold water in court.

“These provisions are clearly constitutional. I think the challenges that pharma’s bringing are specious,” said Christopher Morten, associate clinical professor of law at Columbia Law School and director of Columbia’s Science, Health & Information Clinic.

“They’re really creative, and to some extent … you sort of have to hand it to the lawyers retained by these pharma companies doing their best,” he added. “They’re doing backflips to come up with arguments to try to take this law down. But I don’t think that their constitutional arguments pass muster.”

Along with Medicare negotiations continuing, additional efforts to provide access to affordable medicines have been made recently. Earlier this month, Florida became the first state to receive approval to import cheaper drugs from Canada.

Last month, the Biden administration released a framework for enforcing its march-in rights on drugs developed with taxpayer dollars. March-in rights, which have never been utilized by the federal government previously, would allow the administration to license a product to another manufacturer to produce at a lower cost.

These moves are a symptom of Americans reaching a “breaking point” when it comes to hard-to-afford drugs, according to Merith Basey, executive director of the bipartisan advocacy organization Patients For Affordable Drugs.

“This is a major everyday problem for ordinary people,” Basey said. “I would say all the tools that we have are there to be used.”

Basey is quick to note that these recent developments won’t benefit all patients. Medicare negotiation, if it goes into effect in 2026 as planned, will only help Medicare beneficiaries, and only a handful of other states have approved laws that would allow them to establish drug importation programs, such as Florida.

“What we’re looking for, I think, is we need to not tinker around the edges. We need to really be looking at the reforms that shift the system to lower drug prices for everyone everywhere so that Big Pharma cannot continue to maintain that monopoly control that it has,” she said.

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