Fifth Circuit Affirms Medicare Drug-Price Negotiation Program

On Wednesday, the U.S. Court of Appeals for the Fifth Circuit upheld key provisions of the Inflation Reduction Act’s Medicare drug-price negotiation program. Writing for the panel, Judge Leslie Southwick concluded that drug manufacturers lack a protected property interest in setting their own prices for Medicare beneficiaries because participation in Medicare and Medicaid is voluntary. The court rejected the Pharmaceutical Research and Manufacturers of America (PhRMA) claim that the program violates due-process rights, that Congress improperly delegated authority to health officials, and that the IRA’s excise tax on non-participating firms is an excessive fine. The decision follows earlier defeats for challengers such as Merck and AstraZeneca and comes after the Supreme Court declined to hear similar cases earlier in the year.

Newsweek

The ruling leaves the negotiation program intact while remaining subject to ongoing litigation. By allowing the government to negotiate prices for high-cost drugs, the program is expected to lower out-of-pocket spending for seniors and reduce overall taxpayer costs. Alex Beene, a financial-literacy instructor, notes that lower negotiated prices can lessen the financial barrier that leads some patients to skip or delay prescriptions, though he cautions that price cuts alone do not guarantee better health outcomes. Michael Ryan, a finance expert, emphasizes that affordability is a key factor in medication adherence for older Americans.

Newsweek

PhRMA, the trade group representing major drugmakers, sued in 2023 alleging that the IRA’s provisions infringe constitutional protections and impose an unduly punitive excise tax on firms that refuse to negotiate. The organization argues that the program coerces participation because Medicare represents a vital market; without access, companies fear loss of revenue and market share. Kevin Thompson, CEO of 9i Capital Group, acknowledges the industry’s reliance on Medicare and Medicaid but suggests that if manufacturers withdrew their products, cheaper alternatives could emerge, potentially driving prices down further. PhRMA indicated it is reviewing the Fifth Circuit’s decision and may consider an appeal to the Supreme Court.

Newsweek

• “We agree with the Second Circuit, which rejected another IRA due process challenge on the grounds that a ‘company suffers no deprivation of its property interests by voluntarily submitting to a price-regulated government program,’” — Leslie Southwick, judge

Newsweek

• “Ultimately, this is about the balance between affordability and innovation,” — Alex Beene, a financial literacy instructor at the University of Tennessee at Martin

Newsweek

• “This ruling is mostly positive for beneficiaries because keeping expensive medications affordable can have real health consequences when people are less likely to skip prescriptions,” — Alex Beene, a financial literacy instructor at the University of Tennessee at Martin

Newsweek