Third Circuit Ruling Upholds No Judicial Review Clause for Medicare Drug Price Negotiations

Third Circuit Ruling Upholds No Judicial Review Clause for Medicare Drug Price Negotiations

Medicare Drug Price Negotiation Under Inflation Reduction Act Faces Legal Setbacks for Pharma

The U.S. Court of Appeals for the Third Circuit recently upheld the constitutionality of the Medicare Drug Price Negotiation Program, which was established under the Inflation Reduction Act. The case, filed by Danish pharmaceutical company Novo Nordisk, challenged the Centres for Medicare and Medicaid Services decision to include certain insulin products in its first round of price negotiations. This decision is part of an ongoing series of legal battles in which pharmaceutical companies have sought to overturn provisions of the IRA, aimed at lowering prescription drug prices for Medicare beneficiaries.

Overview of the Case

The legal dispute centred around the classification of several injectable insulin products produced by Novo Nordisk. These products, including Fiasp and NovoLog, were selected by CMS as eligible for price negotiations due to their status as single-source drugs under the IRA. Novo Nordisk argued that the CMS grouping of these products as a single drug violated statutory limits and infringed upon its legal rights. The case progressed through the District Court of New Jersey, where Novo Nordisk's claims were dismissed, with the court ruling that it lacked jurisdiction to review CMS’ designation decisions under the provisions of the IRA.

Novo Nordisk then appealed the decision to the Third Circuit, raising issues related to judicial review, the nondelegation doctrine, and constitutional rights. Ultimately, the Third Circuit ruled in favour of the government, reinforcing the principle that the IRA precludes judicial review of the CMS decisions regarding eligible drugs and single-source drug classifications.

"No Judicial Review" Provision

At the heart of the Third Circuit’s ruling was the IRA's "no judicial review" clause, which explicitly limits legal challenges to CMS determinations regarding negotiation-eligible and single-source drugs. According to 42 U.S.C. § 1320f-7(2), there is no judicial review allowed for decisions on which drugs are eligible for price negotiations and which are considered single-source. This provision serves as a safeguard against delays or disruptions in the negotiation process that could result from prolonged legal challenges.

In its ruling, the Third Circuit emphasized the clear congressional intent to prevent judicial review of these decisions. While judicial review is generally a cornerstone of the American legal system, the court noted that Congress had specifically excluded challenges to CMS’ determination under the IRA to ensure the swift implementation of drug price negotiations.

CMS's Role in Grouping Drugs for Negotiation

A critical element of the dispute was CMS’s decision to group together multiple insulin products under a single drug category, despite their individual Biologics License Applications. The agency argued that these products were sufficiently similar, using insulin as the active ingredient and manufactured by Novo Nordisk, allowing them to be considered as a single drug for the purposes of the negotiation process.

Novo Nordisk contended that the grouping violated statutory limits set by the IRA and was an overreach of CMS's regulatory powers. However, the Third Circuit upheld the agency's approach, ruling that the "no judicial review" provision applied not only to the final decisions but also to the process by which CMS made its determinations.

Constitutional Challenges and the Nondelegation Doctrine

Novo Nordisk also raised constitutional challenges, primarily arguing that the IRA's Medicare price negotiation program violated the nondelegation doctrine. This doctrine restricts Congress from delegating its legislative powers to the executive branch without clear and specific guidance. Novo Nordisk contended that the IRA lacked sufficient rules to guide CMS in setting drug prices, thus unlawfully delegating legislative power.

The Third Circuit disagreed, citing the detailed rules contained within the IRA that govern how CMS must negotiate drug prices, including specific price ceilings and conditions that CMS must adhere to during negotiations. The court found these rules to be sufficiently detailed, rejecting the claim that the law violated the nondelegation doctrine.

Impact on the Pharmaceutical Industry

This ruling marks a significant defeat for Novo Nordisk and other pharmaceutical companies that have challenged the Medicare Drug Price Negotiation Program. The ruling continues a trend of legal setbacks for the pharmaceutical industry, with prior challenges to the IRA being rejected by the Second and Sixth Circuits earlier in the year.

While the decision reinforces the scope of CMS's authority, it also highlights the broader implications for the pharmaceutical industry. Drug companies have argued that participating in the negotiation process would undermine their ability to set prices freely and could lead to reduced access to innovative treatments for patients. However, courts have consistently maintained that participation in Medicare and Medicaid is voluntary, and companies can choose not to participate in the program, though this could result in adverse consequences for patient access.

Reaction from Patient Advocacy Groups

Patient advocacy groups have welcomed the Third Circuit's decision, with organizations like Patients for Affordable Drugs celebrating the ruling. They argue that the court's decision is a victory for Medicare beneficiaries, ensuring that drug prices can be negotiated more effectively to make prescription medications more affordable. The ruling marks the 15th legal defeat for the pharmaceutical industry in its attempts to block the IRA’s provisions. P4AD emphasized that the decision will provide critical support for efforts to lower drug costs, particularly for seniors and low-income individuals who rely on Medicare for their health care needs.

The Third Circuit's ruling in favour of the government is a significant moment in the ongoing implementation of the IRA's Medicare Drug Price Negotiation Program. By upholding the “no judicial review” provision, the court reinforced the authority of CMS to negotiate drug prices without interference from the courts. While pharmaceutical companies continue to voice concerns over the impact on their operations, the decision reflects the broader goal of improving affordability and access to medications for millions of Medicare beneficiaries. As legal challenges to the IRA continue to unfold, this ruling further solidifies the program’s legal foundation, paving the way for future rounds of drug price negotiations.