By Brendan Pierson
May 1 (Reuters) - Healthcare and drug industry groups on Wednesday urged a U.S. appeals court to revive their challenge to a law requiring manufacturers to negotiate the prices of some drugs with the U.S government's Medicare health insurance program or pay heavy penalties.
Pharmaceutical Research and Manufacturers of America (PhRMA), the Global Colon Cancer Association and the National Infusion Center Association (NICA) sued the government last year, claiming the program, a signature initiative of Democratic President Joe Biden, violated the U.S. Constitution by giving too much power to federal regulators and imposing excessive fines on companies that refuse to participate.
But the arguments before a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans hinged on a narrower issue: whether a Texas judge was right to throw out the case after concluding that he lacked jurisdiction over it.
U.S. District Judge David Ezra in Austin, Texas, ruled in February that NICA can only pursue its claims through an administrative process for challenging Medicare reimbursement decisions. The organization has said that its infusion center members' Medicare reimbursements are tied to the prices of drugs they administer, meaning that a ceiling on prices could lead to lower reimbursements.
Because NICA is the only plaintiff based in Texas, the judge said, the other plaintiffs cannot go forward with their lawsuit there without it.
John Elwood of Arnold & Porter Kaye Scholer, arguing for the plaintiffs, told the 5th Circuit panel that the administrative process, which begins within the U.S. Department of Health and Human Services, cannot address NICA's constitutional claims. He also said it was the negotiation program itself, rather than any loss of money, that the group was challenging.
"We are injured by the decision-making process that is constitutionally invalid," he said.
Catherine Padhi, a lawyer for the government, said there was no right for healthcare providers to be involved in the government's decisions about Medicare.
Circuit Judge Jennifer Elrod, who was appointed by Republican former President George W. Bush, appeared sympathetic to the plaintiffs' arguments. She said the government was using "monopsony power" by forcing companies to negotiate, pay heavy fines or leave Medicare altogether, and that "the (Federal Trade Commission's) heads would explode" if a private company acted similarly.
"This is challenging a novel, unprecedented price-setting program in a setting where the government is the 800-pound gorilla," she told Padhi, later asking, "How would this at all be lawful in any way?"
Padhi stressed that the appeal concerned only the claims of NICA members, who do not sell drugs directly to the government, and not drugmakers' claim that the program is unlawfully coercive and punitive. But she also rejected the idea that drugmakers' rights were violated.
"There's certainly no right to sell a product to the government at any price you wish," she said.
The other two members of the panel — Circuit Judges Kyle Duncan, who was appointed by Republican former President Donald Trump, and Irma Ramirez, who was nominated by Biden, a Democrat — did not ask any questions.
The argument came two days after a New Jersey judge rejected challenges by Johnson & Johnson and Bristol Myers Squibb to the drug pricing program, which is part of the 2022 Inflation Reduction Act. So far all four federal judges to rule on lawsuits over the program have rejected them.
If the price negotiations are allowed to go forward, the negotiated prices for the first set of drugs chosen for the program would be set in September, with more drugs added in future years.
The chosen drugs include Merck's diabetes drug Januvia, Bristol Myers Squibb and Pfizer's blood thinner Eliquis and AbbVie's leukemia treatment Imbruvica.
The program aims to save $25 billion in drug costs annually by 2031. Industry analysts have said that the negotiated discounts could be steep, ranging from the statutory minimum of 25% to as much as 60%.
The case is National Infusion Center Association v. Becerra, 5th U.S. Circuit Court of Appeals, No. 24-50180.
For plaintiffs: John Elwood of Arnold & Porter Kaye Scholer
For the government: Catherine Padhi of the U.S. Department of Justice
Read more:
J&J, Bristol Myers lose challenges to US drug price negotiation program
Pharmaceutical group's lawsuit over Medicare drug price program dismissed
Pharmaceutical trade group sues US over Medicare drug price negotiation plans
(Reporting By Brendan Pierson in New York)
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