The 3rd U.S. Circuit Court of Appeals has upheld a lower court's dismissal of AstraZeneca's legal challenge to Medicare's drug price negotiation program, dealing a significant blow to pharmaceutical industry efforts to halt the landmark pricing initiative.
In Thursday's ruling, the court determined that the British drugmaker failed to demonstrate how it had suffered specific injury from the program or that its due process rights were violated. The decision represents a victory for the Medicare drug price negotiation mechanism established under the Inflation Reduction Act.
"While AstraZeneca had said the price negotiations would impact its ability to make research and development decisions, it failed to give an example of how that impact had materialized," the court stated in its opinion. The judges further concluded there was "no protected property interest in selling medication to Medicare members at a price higher than what the government is willing to pay."
Medicare Negotiation Program Details
The Medicare drug price negotiation program represents the first initiative of its kind in the United States, requiring pharmaceutical companies to negotiate directly with the federal government on pricing for medications covered under Medicare, which serves approximately 66 million Americans.
AstraZeneca's diabetes medication Farxiga is among the drugs selected for the initial round of price negotiations by the Centers for Medicare and Medicaid Services (CMS). These negotiated prices are scheduled to take effect in 2025.
A spokesperson for AstraZeneca expressed disappointment with the ruling and indicated the company is "considering next steps." The pharmaceutical manufacturer initially filed its lawsuit challenging the program in 2023.
Broader Industry Opposition
AstraZeneca's legal challenge is one of several brought against the Medicare negotiation program by pharmaceutical companies and industry groups. Other challengers include Johnson & Johnson, Merck & Co, Bristol Myers Squibb, Boehringer Ingelheim, and the Pharmaceutical Research and Manufacturers of America (PhRMA).
The legal landscape surrounding these challenges remains complex. In September, the 5th U.S. Circuit Court of Appeals in New Orleans revived a challenge brought by PhRMA and other industry groups, ruling that a lower court incorrectly dismissed that case on jurisdictional grounds. However, like the 3rd Circuit's ruling in the AstraZeneca case, the 5th Circuit did not address the substantive merits of the law itself.
Implications for Drug Pricing
The Medicare negotiation program represents a significant shift in U.S. pharmaceutical pricing policy. Proponents argue it will help control healthcare costs for seniors and reduce federal spending, while critics in the pharmaceutical industry contend it could limit innovation and research investment.
Despite ongoing legal challenges, the negotiation process has continued to move forward. The initial round of negotiated drug prices is scheduled to be implemented next year, potentially affecting millions of Medicare beneficiaries and establishing a precedent for government involvement in pharmaceutical pricing.
The conflicting circuit court rulings on procedural aspects of these challenges suggest the legal battle over Medicare drug price negotiations may eventually reach the Supreme Court, where the substantive constitutional questions could finally be addressed.
