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Federal Court Affirms Medicare Price Negotiations, Dismissing PhRMA Challenge Federal Court Affirms Medicare Price Negotiations, Dismissing PhRMA Challenge

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A federal judge in Texas handed down a significant ruling on Monday, dismissing a lawsuit brought by the Pharmaceutical Research and Manufacturers of America (PhRMA) to halt Medicare drug pricing negotiations. The decision constitutes a major victory for the Biden administration as it seeks to implement a pivotal health policy reform.

Judge’s Ruling and Impact

The U.S. District Court for the Western District of Texas ruled against the lawsuit filed by PhRMA, along with the National Infusion Center Association (NICA) and the Global Colon Cancer Association in June 2023. Judge David Alan Ezra, in his ruling, stated that the court lacked jurisdiction over NICA’s claims against the price negotiation process.

β€œThe Court lacks jurisdiction over NICA’s claims because the claims here β€˜arise under’ the Medicare Act, and the claims do not fall under the exception carved out for when claims may completely avoid judicial or administrative review. Therefore, NICA’s claims are dismissed without prejudice,” Ezra wrote.

This milestone ruling marks the first instance where a court has invalidated a legal challenge to the legislation enacted under President Biden’s Inflation Reduction Act last year. Notably, eight other cases filed by major drugmakers, including Merck (NYSE:MRK) and Bristol Myers (NYSE:BMY), are still pending.

PhRMA and Medicare Negotiations

Founded in 1958, PhRMA represents companies such as Pfizer (NYSE:PFE), Lilly (NYSE:LLY), Amgen (AMGN), Roche (OTCQX:RHHBY), GSK (GSK), J&J (JNJ), and Biogen (BIIB). The industry group has been an influential voice in advocating for the interests of pharmaceutical firms.

In August, the Centers for Medicare and Medicaid Services (CMS) announced the first 10 Medicare Part D drugs selected for the initial round of negotiations. These negotiations aim to lead to revised prices paid by the federal health program in 2026. The list included blockbuster therapies from Bristol Myers (BMY), Pfizer (PFE), Eli Lilly (LLY), AbbVie (ABBV), Johnson & Johnson (JNJ), AstraZeneca (AZN), Novartis (NVS) (OTCPK:NVSEF), Merck (MRK), Amgen (AMGN), and Novo Nordisk (NVO) (OTCPK:NONOF).

Earlier this month, CMS presented initial pricing offers to the companies selected for the program.

Potential Implications

The dismissal of PhRMA’s challenge is poised to have far-reaching implications. It strengthens the Biden administration’s push for more transparency and oversight in drug pricing, potentially leading to cost savings for Medicare and its beneficiaries. The decision also underscores the shifting landscape for pharmaceutical companies as they navigate evolving regulatory dynamics.

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