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Good morning! The bitter legal battle over Medicare drug price negotiations is heating up – and so far, it's looking favorable for the Biden administration.
So, what's this fight all about in the first place? It centers around a key provision of President Joe Biden's Inflation Reduction Act that gives Medicare the power to negotiate prices for costly prescription medicines. The talks aim to make those drugs more affordable for seniors, and will likely take a bite out of pharmaceutical industry profits.
The Biden administration faces a flurry of lawsuits from drugmakers with medicines selected for the first round of talks. The final negotiated prices of the initial ten drugs will go into effect in 2026.
The lawsuits argue the price talks are unconstitutional and must be struck down.
Some of the drugmakers specifically contend the negotiations would force them to sell medicines at huge discounts, below market rates, among other arguments. They assert that this violates due process under the Fifth Amendment, which requires the government to pay reasonable compensation for private property taken for public use.
But the administration has already clinched a few early wins in some of the cases.
- AstraZeneca: A federal judge in Delaware earlier this month rejected the drugmaker's lawsuit. That judge said AstraZeneca's due process claim "fails as a matter of law," noting that the company isn't entitled to sell its drugs to the government "at any price other than what the government is willing to pay."
- PhRMA, the pharmaceutical industry's biggest lobbying group, and two other organizations: A federal judge in Texas last month dismissed the suit, arguing that the court does not have jurisdiction to hear the claims.
- U.S. Chamber of Commerce, one of the nation's largest lobbying groups: A federal judge in Ohio partially ruled in the case in September, denying a preliminary injunction sought by the Chamber that aimed to block the price talks by Oct. 1. The judge said the group hadn't demonstrated a "strong likelihood" of succeeding on its claim that the program violates due process.
"All of the momentum is clearly on the side of the government at this point, and not on the side of some of these other manufacturers," Theresa Carnegie, a member at Mintz Levin, told CNBC.
Several cases are still pending, including legal challenges from big names such as Merck and Johnson & Johnson. Decisions in those cases will likely come by the end of the year, Carnegie noted.
But she said the rulings we've seen so far "are meaningful" for those remaining legal challenges.
"Any judge in other cases is going to look at the previous decisions, and it's necessarily going to influence them in terms of their potential decisions, how they would view it, and they would have to find a novel theory or go against it," Carnegie said. For example, she noted that courts in two cases already struck down the pharmaceutical industry's due process claims.
Drugmakers have said they aim to escalate their legal fight over Medicare drug price negotiations to the Supreme Court.
Here's how: The companies scattered their suits in federal courts around the U.S. Several legal experts have said that the industry hopes to obtain conflicting rulings from federal appellate courts, which could fast-track the issue to the nation's highest court.
But Carnegie said it's looking "less and less possible" the legal battle will reach the Supreme Court.
With three rulings in favor of the Biden administration, the pharmaceutical industry will need to see a court take a different position over the next several months to create a "circuit split" that the Supreme Court could agree to review.
Still, "given how handily some of these decisions have come out and how the courts have made these determinations, it doesn't seem that these issues are creating uncertainty or a circuit split," Carnegie said.
So, what happens next? Carnegie said drugmakers appear to recognize that their lawsuits may not go the way they want, so they could shift their litigation focus to how the government implements the program.
Drugmakers and trade associations are going to look "for any opportunity to object to the way that the program is being run," she said.
Feel free to send any tips, suggestions, story ideas and data to Annika at annikakim.constantino@nbcuni.com.
Latest in health-care technology
CNBC is on the ground at HIMSS
This is Ashley, reporting live from Orlando, Florida!
I'm one of the more than 35,000 people attending the HIMSS Global Health Conference this week, and it's shaping up to be a great event. Health-care executives and professionals from all over the world are here to discuss the latest care trends and cutting-edge tech, and I'll bring you everything you need to know from the ground.
I went to HIMSS for the first time last year when it was held in Chicago, and artificial intelligence completely stole the show. All anyone could talk about was generative AI and its potential, especially since the conference took place a few short months after OpenAI's ChatGPT exploded into the public sphere.
I'm expecting AI to be the dominant theme again this year, though in a slightly different capacity. Last year, there was a lot of talk about what the technology could someday achieve as companies like Epic Systems, Microsoft, Amazon and Google announced early AI applications and partnerships.
This year, I think the focus will be on what AI is already achieving in the sector. As the market becomes increasingly saturated with health-care-specific AI solutions, tech companies need to prove that their tools are efficient, effective and, of course, safe, if they want to remain competitive. Game on!
There have already been a couple announcements of note. Salesforce unveiled new AI solutions ahead of HIMSS that could help reduce clinicians' administrative workloads by unifying disparate data and automating some manual tasks. Microsoft announced the formation of the Trustworthy & Responsible AI Network on Monday, which will aim to improve the quality and trustworthiness of the tech in health care, according to a release. Microsoft's announcement fell just one week after the Coalition for Health AI named its CEO and board of directors, so efforts to regulate the use of AI in health are heating up.
Aside from the conference, I've also learned that Orlando is a major health tech hub in its own right. I toured three facilities on Monday in a part of the city called Lake Nona. Here, among gleaming new buildings and palm trees, health systems are piloting and developing state-of-the-art technologies before rolling them out more broadly. More details to come on this soon.
It's going to be a busy week here, and this New York journalist might even get to see some sunshine in between meetings. What more could I ask for?
Feel free to send any tips, suggestions, story ideas and data to Ashley at ashley.capoot@nbcuni.com.
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