Big Pharma fights Biden program to lower drug costs
TRENTON, N.J. — Pharmaceutical giants are mounting a vigorous legal battle against President Joe Biden’s plan to lower seniors’ prescription drug costs, urging federal judges here and around the country to invalidate a new program that aims to reduce the price of medications for high blood pressure, heart disease, cancer and diabetes.
In a flurry of lawsuits, these drugmakers have blasted the government initiative as unconstitutional, defended their pricing practices and warned regulation could undermine future cures — even as millions of older Americans say they are struggling to afford essential treatments.
The legal wrangling appears primed to reach the Supreme Court, which could carry lasting implications for the government’s ability to regulate health care prices broadly. The stakes are also enormous for Biden, who ran in 2020 on a pledge to fulfill a longtime promise — made by both parties — to ease a key financial strain on older Americans.
The pharmaceutical industry specifically seeks to block a new law that enables Medicare to negotiate the price of select drugs under its prescription benefit, known as Part D. The idea is modeled after similar systems internationally, which have helped lower costs in other countries even as Americans face sky-high prices for some of the same treatments.
Enacted in 2022 as part of Biden’s signature economic package, the Inflation Reduction Act, the law requires the administration to identify an initial set of 10 drugs to negotiate. The list was unveiled in August and includes the blood-thinner Eliquis, the heart-failure medication Farxiga and the diabetes pill Jardiance.
While manufacturers have since engaged in price discussions with the administration, they have also unleashed a blitz of legal challenges meant to upend the entire system. The intensity of their opposition was on display Thursday, as four pharmaceutical giants urged a federal judge in New Jersey to terminate the program before seniors would see any change to their drug costs.
Lawyers for Bristol Myers
Squibb, Janssen, Novartis and Novo Nordisk offered an array of objections to the program, arguing that it constituted an illegal taking of their drugs, for example, and wrongly carried the threat of steep financial penalties. Some companies also claimed that merely signing a contract would be unconstitutional because it would force them to acknowledge in public that a lower price is a fairer one.
“This program would have a debilitating effect on plaintiffs’ ability to compete and innovate,” said Kevin King, a lawyer for Janssen, which makes Xarelto, an anti-blood-clot medicine, and Stelara, prescribed for psoriatic arthritis. Both are subject to negotiation.
Over roughly five hours of arguments, the judge in the case — Zahid Quraishi, a Biden appointee — frequently pressed the industry about its claims, noting at one point the drug companies seemed to be portraying themselves as “Mother Theresas” that “develop drugs for free.”
The lawyers’ criticisms of the program echoed years of attacks from industry lobbyists, who signaled anew this month that they are committed to preventing the Biden administration from striking agreements to lower prices under Medicare.
“We feel confident that ultimately justice will prevail here, and we’ll keep pushing along,” said James Stansel, the general counsel of PhRMA, the industry’s leading lobbying group.
The legal campaign offers the most immediate test for one of Biden’s prized legislative accomplishments, which relaxed a longtime prohibition against Medicare negotiating drug costs directly with manufacturers. Hours after court arguments concluded in Trenton, the president called on Congress to preserve and expand the very program that pharmaceutical giants are trying to unwind.
“Americans pay more for prescription drugs than anywhere else,” he said during his State of the Union address. “It’s wrong, and I’m ending it.
Generally, Americans do pay more for prescription drugs: Among the 10 medications that the United States has targeted for negotiation, prices can range from three to eight times higher than in Canada, Japan and other countries, according to a January report from the Commonwealth Fund, a research nonprofit, which studied 2021 data.
Historically, these costs have forced some of the poorest families to choose between lifesaving treatments and other needs like food and housing, while adding to the price of Medicare as U.S. debt skyrockets. But drugmakers have defended their practices, stressing the cost of developing a new drug ranges into the billions of dollars — often involving an expensive trial-and-error process in which many ideas never come to market.
More than a year after Democrats adopted the Inflation Reduction Act over Republican opposition, PhRMA’s top lawyer said there already had been “lots of announcements [from] companies that have ended programs,” particularly affecting research on cancer treatments.
“If your product is going to be price-controlled two years from now,” Stansel asked, “are you going to spend $400 million on a clinical trial that probably won’t even be finished before the drug is price controlled?”
Supporters of the law point to the industry’s sky-high profits, generous executive compensation packages and lucrative stock buyback programs. Last year, Bristol Myers Squibb posted $45 billion in revenue, Merck reported about $60 billion in sales, and Johnson & Johnson raked in more than $85 billion, which includes drugs sold by Janssen, according to their earnings reports.
“Pharmaceutical companies are doing well right now,” said Kelly Bagby, vice president at AARP Foundation Litigation, which has filed legal briefs in support of the Biden administration. “They want to make sure their historical profitability is maintained, and not changed, while at the same time trying to delay everything.”
Under siege in Washington, the drug industry has focused its attention on the courts: Since last year, companies and lobbying groups have filed nine lawsuits in Delaware, Ohio, New Jersey, Texas and the District of Columbia. While pharmaceutical giants have so far failed to score a victory, they have signaled they do not plan to waver in their campaign.
In July, for example, the U.S. Chamber of Commerce joined local organizations in urging a federal judge in Ohio to issue an emergency halt to the negotiations. The Chamber’s members include AbbVie, which markets Imbruvica, one of the initial 10 drugs targeted by Medicare. The court in September rejected that petition on procedural grounds, but the broader case is still underway.
The lobbying group PhRMA helped bring another lawsuit in Texas, arguing in the summer that the Medicare negotiation program risks “drastically slowing innovation, reducing drug availability, and worsening patient outcomes.” A judge later ruled in favor of the Biden administration, prompting the industry to begin an appeal on Wednesday.
And lawyers for AstraZeneca, the maker of Farxiga, told a federal judge in Delaware that the law was like a “gun to the head,” forcing the company to accept the government’s price or a massive blow to its bottom line. As in other cases, the company urged the court to toss out the entire drug-pricing program.
Under the Inflation Reduction Act, drug companies that engage in negotiations but refuse to accept the final price have a choice: They can pay a massive tax, or they can withdraw from Medicare entirely, denying medicines to seniors and losing a major source of revenue.
This month, Colm F. Connolly, chief judge for the U.S. District Court in Delaware, rejected AstraZeneca’s arguments. Appointed by former President Donald Trump in 2018, he described the negotiations as an “economic opportunity that AstraZeneca is free to accept or reject” because the government is not required to buy drugs at prices it isn’t willing to pay.
Last week, AstraZeneca said in a statement it is evaluating its next steps, which could include an appeal. It declined to comment on the record for this article.
The legal challenges are part of a wider-ranging offensive by the pharmaceutical industry, long seen as one of the most powerful political forces in the nation’s capital. Since 2022, drugmakers and other companies have spent more than $761 million to lobby lawmakers and regulators, according to data from OpenSecrets, a money-in-politics watchdog.
Over that same period, the industry’s political action committees, along with their executives and employees, have also donated more than $77.5 million to federal office-seekers, the figures show. The tally does not include sharply critical ads run by groups like PhRMA targeting supporters of the Inflation Reduction Act.
The effort helped the industry whittle down Democrats’ original plans in 2022 to negotiate a wider range of drugs on a more aggressive timeline. Since then, major drugmakers have also supported a slew of Republican-led efforts to weaken or repeal Medicare’s new powers. The sustained opposition has raised the stakes entering the 2024 election: A GOP takeover of Congress and the White House could result in the termination of Biden’s negotiation program.
“The drug companies are going to full-court press through all the avenues they have influence,” said Steve Knievel, a health policy expert at Public Citizen, which has filed briefs supporting the administration.
In the meantime, legal experts said the drug industry hopes to create conflict among different courts nationwide. That could raise the odds that the negotiation program comes to a halt before the government can finalize and implement new, lower prices starting in 2026. It could also attract attention from the Supreme Court, which is more likely to hear a case on which federal judges disagree. (One of the lawyers advising the drug companies is Noel Francisco, a solicitor general under Trump.)
“It can only take one judge, or one panel of judges, to get some sort of nationwide relief,” said Zachary Baron, a director of the Health Policy and the Law Initiative at the O’Neill Institute at Georgetown University.
For four of the nation’s largest pharmaceutical companies, that gambit played out Thursday at a federal courthouse in New Jersey: One by one, they urged the judge to strike down the pricing program.
Yaakov Roth, a lawyer for Bristol Myers Squibb, likened the negotiations to a homeowner facing eviction: “It’s like the government saying, ‘We didn’t take your house, we just said we would put you in jail if you didn’t hand over the keys.”
Ashley Parrish, who appeared on behalf of Novo Nordisk, said the Biden administration had run amok in implementing the law. “There are no procedures in place to ensure what the agency is doing is within constitutional bounds,” he told the judge.
And Samir Deger-Sen, representing Novartis, said the company would face a staggering tax for the “simple act of failing to agree with what the government says is the maximum fair price.”
Lawyers for the Justice Department repeatedly contested those claims, but the drug giants continued to press their case aggressively: They even argued that any deal with the government over prescription prices might violate their First Amendment rights.
“The program is effectively requiring manufacturers to indict themselves on the charges of price gouging,” Roth argued.