After months into the wave of lawsuits seeking to derail the Medicare drug price negotiation program enacted under the Inflation Reduction Act, a recent decision denied a major attempt to stop the program’s implementation. On September 29, 2023, a federal district court in Ohio issued the first ruling directly confronting the core legal arguments made by the pharmaceutical industry and their allies.
A lawsuit brought in Ohio by the U.S. Chamber of Commerce (Chamber) and their state and local chapters challenged the constitutionality of the Medicare drug negotiation program. On July 12, 2023, the Chamber filed a motion for preliminary injunction in Ohio, asking the court to prohibit the administration from implementing the negotiation program on due process grounds. The U.S. Department of Justice (DOJ) opposed that motion and filed a motion to dismiss the Chamber’s case on multiple preliminary grounds. On September 15, 2023, the court held oral arguments allowing the Chamber and the DOJ to present their legal arguments in greater detail.
In a major win for the Biden administration and loss for the pharmaceutical industry and their allies, the judge in Ohio, Judge Michael J. Newman, rejected the Chamber’s motion for a preliminary injunction. The judge also rejected the administration’s motion to dismiss the lawsuit entirely, for now, but suggested he would reevaluate whether the Chamber in fact had standing to bring the case. This Expert Column provides more detail concerning the rationale the judge provided in his decision.
The Court’s Decision
Judge Newman’s decision started with his analysis considering the motion to dismiss and proceeded to address the motion for a preliminary injunction.
Right off the bat, the court observed that because federal courts have limited jurisdiction, a person cannot successfully bring a lawsuit without showing that they are harmed or likely to be harmed by the action or policy they are challenging in the law. In other words, they must show they have “standing” to bring the lawsuit. An organization like the Chamber may bring a lawsuit on behalf of its members — under the principle of associational standing — if it meets specified constitutional criteria.
In recognizing that the court would benefit from additional information and briefing from both parties, Judge Newman stated that he had “no opinion as to whether or not Plaintiffs have standing.” He suggested the best path forward would be for the Chamber to amend its complaint and to allow for limited discovery on disputed issues.
For an association like the Chamber to be able to bring this lawsuit, the judge explained that it must identify at least one of its members that would be able to sue in their own right. The Chamber and DOJ disputed whether AbbVie, a member of the Chamber and a drug company, would have been able to bring the lawsuit. The Chamber argues that AbbVie is a “manufacturer” of a drug selected for negotiation, but the government responded that a non-party to this lawsuit is actually the “manufacturer” of the drug in question.
Accordingly, in what the judge described as “in the interest of justice,” he allowed the Chamber to amend their complaint and, where appropriate, have discovery taken on the following issues:
- Whether AbbVie is in fact a “manufacturer” of a drug selected for negotiation and, thus, subject to the program’s requirements;
- Whether AbbVie has “already been harmed” by the drug negotiation program or whether they are only subject to “future injuries”;
- Whether individual drug companies who are members of the Chamber (some of whom are bringing their own lawsuits separately) are required to join the Chamber’s lawsuit; and
- Whether the Chamber can be harmed by the drug negotiation program before a negotiated price goes into effect.
A preliminary injunction is an “extraordinary” form of relief that allows a party to block the government from being able to enforce certain legislation or regulatory actions before obligations on the parties bringing a lawsuit can even go into effect. Furthermore, as recent decisions in other lawsuits inside and outside the health care context challenging major policy initiatives have shown, a single judge can issue a nationwide injunction blocking the enforcement of a federal program or policy across the entire country. The stakes of these decisions are incredibly high for the government and the intended beneficiaries of the programs or policies at issue.
Applying the precedent established by the Supreme Court and Sixth Circuit Court of Appeals, Judge Newman considered whether the Chamber’s motion met this high bar.
The Chamber and DOJ presented starkly different arguments concerning the nature of the Medicare drug negotiation program, the controlling precedent for the judge, and whether the “public interest” would be served in granting an injunction. Amicus briefs filed in support of the government highlighted the “health and financial interests” of Medicare enrollees and the need to allow negotiations to continue “to stop Medicare and taxpayers from losing billions of dollars from unjustified prescription drug prices.”
First, the judge noted the uncertainty regarding whether the Chamber even had standing to bring the lawsuit, stating “they necessarily cannot have a strong likelihood of success on the merits of their due process claim.”
Second, even assuming the Chamber did have standing, the judge proceeded to outline why the Chamber would still not have a successful due process claim. In so doing, he soundly repudiated a number of core legal arguments and assumptions put forth by the Chamber (and other drug companies pursuing their own lawsuits).
With respect to the dispute over whether participation in the Medicare negotiation problem was, in fact, voluntary, the judge pointed to existing precedent in the Sixth Circuit to explain that the law “is clear: participation in Medicare, no matter how vital it may be to a business model, is a completely voluntary choice.” He further stated that as a result, negotiated prices for drugs “cannot be considered confiscatory because pharmaceutical manufacturers who do not wish to participate in the Program have the ability — practical or not — to opt out of Medicare entirely.” In line with what the administration had argued, Judge Newman wrote, “there is no constitutional right (or requirement) to engage in business with the government.” Therefore, consequences associated with such participation “cannot be considered a constitutional violation.”
The court proceeded to also reject the arguments the Chamber presented, suggesting a preliminary injunction was needed “to protect them from imminent and irreparable harm.” The court explained that “economic harm” to the Chamber would be “insufficient” to meet the relevant threshold — given that “it will not occur for years in the future.” The judge held that uncertainty regarding the “maximum fair price” that will result from negotiations also weighs against finding that there was “irreparable harm.” Addressing the Chamber’s arguments that the negotiation program causes harm to their reputation among consumers, he found that this theory “oversimplifies the pharmaceutical industry and its relationship with consumers.” And in rebutting the Chamber’s attempted comparison to utility providers (who are compelled to provide their services to the public), the judge found such an analogy to be “misleading.”
The court closed by addressing the last two preliminary injunction standards — the harm to the public and the promotion of public interest. Because the court found that there was not a strong likelihood that the negotiation program was unconstitutional, “the public interest is not endangered in the absence of preliminary injunctive relief.” The court concluded that the Chamber’s interests “do not outweigh the public interest.”
With the latest lawsuit filed by Novo Nordisk, nine ongoing cases are now seeking to block the implementation of the Medicare drug negotiation program. Over the next several months, briefing will continue at the district court level, and next year, we expect to see several decisions in different cases challenging the drug negotiation program.
In the Chamber’s lawsuit, the judge allowed 14 days for the Chamber to amend its complaint and provided for a limited discovery period to explore certain threshold factual issues discussed above. Assuming the government then files a renewed motion to dismiss the case, the judge will issue another ruling regarding whether the Chamber is a proper party to bring the constitutional claims alleged in this lawsuit.
Even if so, Judge Newman’s initial analysis suggests that he may look skeptically at many, if not all, the Chamber’s constitutional claims seeking to block implementation of the Medicare drug negotiation program. If adopted by other judges reviewing the ongoing constitutional claims being pursued by other drug companies and their allies, Newman’s reasoning in rejecting the Chamber’s motion suggests that those claims could be received skeptically as well.