Mintz IRA Update — A Circuit Win and the End of Chevron Deference Could Shift Tides in Drug Price Negotiation Program Challenges

As detailed in our previous updates, the IRA’s Medicare Drug Price Negotiation Program (the Negotiation Program or Program), which enables the federal government to negotiate prices for some of the costliest Medicare Part D drugs, has been subject to several legal challenges from manufacturers and trade associations over the last year. Since CMS selected the first ten drugs subject to negotiation in late August 2023, four chambers of commerce, two trade associations, and all but one of the affected manufacturers have filed a total of nine lawsuits challenging the constitutionality and legality of the Negotiation Program on several grounds.

Since our last update, there have been developments in several cases as well as a significant Supreme Court ruling in an unrelated case that may create new avenues for manufacturer challenges to the Negotiation Program. Specifically with respect to the Negotiation Program lawsuits:

• In September 2024, the US Court of Appeals for the Fifth Circuit reversed a Texas federal court’s decision tossing on procedural grounds a suit brought by Pharmaceutical Research and Manufacturers of America (PhRMA), the National Infusion Center Association (NICA), and the Global Colon Cancer Association (GCCA), sending the case back for consideration of the merits.
• In late October 2024, the US Court of Appeals for the Third Circuit heard oral argument in appeals from decisions dismissing suits brought by AstraZeneca, Bristol Myers Squibb, and Johnson & Johnson.
• In July and October 2024, a federal district court judge in New Jersey ruled against two manufacturers, granting summary judgment in favor of the government in both cases. Both manufacturers, Novo Nordisk (Novo) and Novartis, have since appealed the decisions to the Third Circuit, and Novo has requested that the court expedite oral arguments and a decision.
• In August 2024, a federal district court judge in Ohio granted the government’s motion to dismiss based on lack of standing and improper venue in a lawsuit led by the Dayton Chamber of Commerce. The plaintiffs have since appealed the ruling to the Sixth Circuit.
• In August 2024, Boehringer Ingelheim (BI) appealed the July 2024 district court ruling granting summary judgment in favor of the government to the Second Circuit.
• In January 2025, Teva Pharmaceuticals USA, Inc. and Teva Branded Pharmaceutical Products R&D, Inc. (Teva) filed a complaint against the US Department of Health and Human Services (HHS) in the US District Court for DC.

Additionally, in late June, the Supreme Court overruled its landmark 1984 Chevron decision in the consolidated cases Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce (Loper Bright). For the last 40 years, Chevron directed courts to defer to a federal agency’s “reasonable” interpretation of ambiguous statutes. While the Loper Bright decision was unrelated to the ongoing Negotiation Program lawsuits, the fact that the ruling reduces judicial deference to administrative agencies may provide a new pathway to block negotiation and implementation of maximum fair prices (MFPs).

Further, on January 20, 2025, President Donald Trump was sworn in for his second term in office. The change in administration has obviously raised questions about the future of the Negotiation Program.

National Infusion Center Association

Months ago, an Austin, Texas-based federal court dismissed the lawsuit brought by PhRMA and two other associations, NICA and GCCA, on procedural grounds. In short, the district court concluded that it lacked subject-matter jurisdiction over NICA’s constitutional claims because those claims had to be “channeled” through HHS before a suit could be brought in court. And without NICA’s claims, the court concluded that the venue in Texas (which is within the jurisdiction of the conservative-leaning Fifth Circuit) was improper. 

In September, the Fifth Circuit reversed the lower court action, scoring the first victory for manufacturers in the ongoing Negotiation Program lawsuits. The Fifth Circuit concluded that the constitutional claims did not have to be channeled through HHS. A majority of the court concluded that because NICA did not challenge specific reimbursement rates, but instead challenged whether an unconstitutional process was created to set the price for the drugs for which its members are reimbursed, the claims did not need to be channeled. (One judge penned a dissent.)  Importantly, the court also concluded that NICA lacked standing based on its claims that the Negotiation Program violated the non-delegation doctrine and that it levies excessive fines, sowing doubt as to whether those claims can be considered by the district court on remand. Though the court did not comment on the merits of the claim, the majority opinion also provides some hints that at least two judges on the Fifth Circuit align with the manufacturers’ view of the Negotiation Program as a “gun to the head” rather than a true negotiation.

The government has the option to petition for further review from either the en banc Fifth Circuit or the Supreme Court. If it does not, then the case will return to the district court for further proceedings on the merits. That merits decision may make its way to the Fifth Circuit in the not-so-distant future.

Third Circuit Hears Argument in AstraZeneca, J&J, and BMS Cases

As we previously reported, federal judges in New Jersey and Delaware rejected constitutional challenges brought by AstraZeneca, Bristol Myers Squibb Company (BMS), and Janssen Pharmaceuticals, Inc., a division of Johnson & Johnson (J&J). Each manufacturer appealed, and the Third Circuit, on October 30, 2024, heard oral argument on the appeals. The arguments before a panel of three judges considered the plaintiffs’ constitutional claims, including violations of the Fifth Amendment Takings Clause, the First Amendment right against government-compelled speech, the unconstitutional conditions doctrine, and procedural due process (which we have previously summarized). The court also considered AstraZeneca’s Administrative Procedures Act claims challenging CMS’s interpretation of “qualifying single source drug” and “bona fide marketing,” as well as the government’s procedural arguments that AstraZeneca lacked standing to bring those claims and, in any event, those claims were subject to the IRA’s judicial-review bar with respect to those interpretations. The judges hurled difficult questions at counsel for both parties, showing no clear inclination of which way the court would rule on the various claims. 

A decision is expected by the spring of 2025. That decision, regardless of its outcome, will likely be appealed to the Supreme Court.

Novo Nordisk and Novartis

On July 31 and October 18, respectively, a New Jersey federal judge rejected constitutional challenges from Novo and Novartis. As we detailed in our last update, on April 29, 2024 Judge Zahid N. Quraishi of the District of New Jersey, who has overseen four of the manufacturer lawsuits, issued a joint ruling against BMS and J&J. The four cases involved many overlapping claims and arguments, and Judge Quraishi’s rulings in the Novo and Novartis decisions largely mirror his earlier ruling against BMS and J&J.

Novo filed its lawsuit against the government on September 29, 2023, after CMS selected two of its products, NovoLog (NovoLog, NovoLog FlexPen, and NovoLog) and FIASP (FIASP, FIASP Flextouch, and FIASP Penfill), for negotiation. The Novo case is notable because CMS controversially aggregated the three NovoLog and three FIASP products as a single selected drug. Novo alleged that the IRA violated the separation of powers, the Fifth Amendment’s Due Process Clause, and the First Amendment’s prohibition on compelled speech (together, Constitutional Claims), as well as the APA and Security Act (SSA) by imposing new legal obligations without complying with notice-and-comment rulemaking procedures, and the express mandate of the IRA by combining the NovoLog and FIASP products as a single drug (together, Statutory Claims).

Consistent with his ruling against BMS-J&J, Judge Quraishi rejected each of the manufacturer’s Constitutional Claims based on the conclusion that participation in Medicare is purely voluntary. The court rejected the Statutory Claims as well, reasoning that because the IRA precluded administrative or judicial review of the selection of drugs, the court lacked subject matter jurisdiction to consider challenges to CMS’s underlying determinations that led to it selecting Novo’s drugs. Further, in considering Novo’s argument that CMS had effectively identified 15 products for 2026, the first year of the Program, (rather than the 10 drugs permitted by the IRA) by combining the NovoLog and FIASP products into a single drug, the court concluded that Novo failed to demonstrate it had standing. To establish standing, a plaintiff must demonstrate that it suffered a concrete injury, that the injury was likely caused by the defendant, and that the injury would likely be redressed by judicial relief. Instead of seeking judicial relief on each of its statutory claims, however, Novo had provided “a ten-paragraph general prayer for relief based on all of their claims,” which the court concluded was “overbroad” because it sought not just to enjoin the injury that Novo suffered, but also “to enjoin the IRA program as a whole and to declare invalid CMS’s entire guidance.”

On September 1, 2023, shortly after CMS selected the company’s heart failure medication, ENTRESTO, for negotiation, Novartis filed suit alleging that the Negotiation Program violated the Fifth Amendment’s Takings Clause and the First Amendment’s prohibition on compelled speech. Novartis also argued that the Program’s “excise tax” was an excessive fine in violation of the Eighth Amendment Excessive Fines Clause. The court rejected each of Novartis’s claims, citing to and reiterating the analysis of these claims in its BMS-J&J and Novo rulings.

Novo and Novartis appealed to the Third Circuit. On January 27, 2025, after three of Novo’s drugs (Ozempic, Wegovy, and Rybelsus) were selected for negotiation for 2027, Novo requested that the court expedite the oral arguments and its decision in the matter.

Dayton Chamber of Commerce

One of the first challenges to the Program was filed by the Dayton Area Chamber of Commerce, the Ohio Chamber of Commerce, the Michigan Chamber of Commerce, and the US Chamber of Commerce (together, the Chambers). As we’ve previously written, on September 29, 2023, the district court denied the Chambers’ motion for a preliminary injunction and the government’s first motion to dismiss, which gave the Chambers the opportunity to amend their complaint and to elaborate on the facts establishing standing. Because each of the Chambers did not have standing to sue in their own right, they asserted standing under the theory of associational standing, which allows associations in some circumstances to sue on behalf of their members who have standing.

After the plaintiffs filed an amended complaint, the Ohio federal court recently ruled in favor of the government’s latest motion to dismiss, dismissing the case on procedural grounds before reaching the merits of the constitutional challenges.

The court concluded that three of the Chambers (Dayton, Ohio, and Michigan) did not have associational standing, while the fourth (US Chamber of Commerce), had it filed the case alone, would have needed to file suit in a different venue. The Chambers had argued that they had associational standing to sue on behalf of members that suffered injury, naming AbbVie (located in Illinois, California, Massachusetts, and the District of Columbia) and Pharmacyclics (based in California). The court concluded that the Chambers had failed to provide information directly connecting the interests of Pharmacyclics or AbbVie to the business climate in the Dayton area, and as such, the interests at stake in this lawsuit were not germane to Dayton’s interest. The court similarly concluded that the Ohio and Michigan Chambers of Commerce had not explained how any named members have interests in Ohio or Michigan. The court reasoned that the US Chamber of Commerce’s purpose — improving business conditions in the US — was sufficiently related to the interest in the lawsuit to satisfy the requirements for associational standing. However, the court agreed with the government’s argument that if Dayton’s claims were dismissed, venue would not be proper in the Southern District of Ohio where the case was filed. As such, the court granted the government’s motion to dismiss with respect to the US Chamber of Commerce as well.

The Chambers appealed the district court’s ruling to the Sixth Circuit, which is not expected to rule for several months.

Boehringer Ingelheim Appeals to the Second Circuit

As detailed in our last update, on July 3, the federal district court in Connecticut overseeing the lawsuit brought by Boehringer Ingelheim (BI) granted the government’s motion for summary judgment, concluding that the Program passed constitutional muster. Resting largely on the conclusion that participation in the Medicare program is purely voluntary, the court rejected BI’s claims, which overlapped with those brought by several of the other manufacturers (including the First Amendment, Takings Clause, and Unconstitutional Conditions claims considered and rejected by other courts). BI has since appealed the ruling to the Second Circuit. A decision from the Second Circuit is not expected for several months.

Teva Files Lawsuit Related to its Drug Austedo

In January 2025, Teva filed a lawsuit against HHS related to its drug Austedo. The lawsuit appears to mirror the arguments advanced by the other lawsuits, including the assertion that CMS’s definition of a Qualifying Single Source Drug and the bona fide marketing standard set forth in CMS’s implementing guidance violate the Administrative Procedures Act (APA), and that the CMS guidance violates the Fifth Amendment’s Due Process Clause. Notably, the Teva lawsuit is the first manufacturer challenge related to the drugs selected for 2027. While Teva filed the lawsuit two days prior to the HHS announcement of the 15 drugs selected for negotiation for 2027, HHS included Austedo on its list of drugs for 2027.

Loper Bright and the End of Chevron Deference

In late June, the Supreme Court issued a ruling in the high-profile Loper Bright case, overturning its long-standing doctrine of Chevron deference. While Loper Bright was not specifically related to the Negotiation Program lawsuits, the ruling is expected to have (and in some cases, already has had) a significant impact on various areas of administrative law. As we discussed in a blog post in August, Loper Bright could breathe fresh life into APA challenges to the Program.

For context, Chevron deference was primarily a product of the Court’s 1984 decision in Chevron USA, Inc. v. Natural Resources Defense Council, which established a two-step test that federal courts were mandated to follow when reviewing whether a federal agency’s interpretation of a statute was permissible. In the first part of the test, courts were required to examine whether Congress had directly spoken to the precise question at issue. If there was an underlying statute that was unambiguous and clear, courts would review whether an agency’s interpretation adhered to the statute. The second step, which is typically referred to as Chevron deference, provided that if the statute was silent or ambiguous on the issue in question, then the court would analyze whether the agency’s interpretation was based on a “permissible construction” of the statute, regardless of whether a court felt that there was a more accurate interpretation of the law.

Long considered a “bedrock” of federal administrative law, Chevron deference essentially gave federal agencies wide latitude to issue federal regulations and administer federal programs based on congressional legislation that often (and sometimes intentionally) has left specific details about how a particular law is supposed to function unaddressed. For many years, the impact of Chevron deference has had a considerable effect on lawsuits challenging agency action. There is also some empirical evidence that Chevron resulted in agency rule drafters adopting more aggressive interpretations of federal statutes.

Subsequent Supreme Court decisions narrowed the scope of Chevron deference so that courts were only required to defer to an agency’s interpretation if supported by formal proceedings, including adjudication and notice-and-comment rulemaking. Opinion letters, policy statements, agency manuals, and other subregulatory guidance were thus afforded lesser judicial deference under Skidmore v. Swift & Co. Along with similar rulings issued by the Supreme Court around the same time, including Corner Post, Inc. v. Board of Governors of the Federal Reserve System and Securities and Exchange Commission v. Jarkesy, Loper Bright is expected to open federal agencies such as CMS up to more scrutiny and increase the number of lawsuits filed against agencies when a statute underlying agency action is ambiguous.

Loper Bright will potentially strengthen the APA claims that manufacturers and other plaintiffs have brought, although it is unclear how much of an immediate impact the Court’s ruling will have on the current Negotiation Program litigation. There is evidence that courts have been deferring to agency interpretations less and less in recent years, and Chevron has not appeared to factor into the Negotiation Program lawsuits, some of which only include constitutional claims that are unaffected by Loper Bright. Even for those lawsuits that include APA claims, the litigations appear to be more focused on the constitutional issues raised. In part, the focus of manufacturers and other plaintiffs on constitutional claims over APA and other statutory claims may be strategic. The constitutional claims, if successful, would be more successful in gutting the Negotiation Program completely, whereas success under the APA claims would likely only affect certain specific aspects of the Program, such as CMS’s subjective determinations in selecting negotiation-eligible drugs and the calculation of MFPs.

It's also unclear how Loper Bright will help manufacturers and other plaintiffs (some of which have taken issue with the fact that CMS implemented the Negotiation Program primarily through subregulatory guidance) overcome the fact that the IRA expressly allows the Secretary of HHS (which CMS is a subagency of) to implement the Program for 2026, 2027, and 2028 “by program instruction or other forms of program guidance.” Manufacturers and other plaintiffs must also overcome the IRA’s bar on judicial review; the IRA also precluded judicial review for many of the aspects of the Negotiation Program that are most concerning manufacturers and other plaintiffs, such as the factors used to determine which drugs are negotiation eligible.

The Teva lawsuit filed in January 2025 includes a single reference to Loper Bright in support of the manufacturer’s assertion that courts “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” It is unclear whether Loper Bright will play a larger role in Teva’s argument as the litigation progresses. It would not be surprising if other manufacturers and plaintiffs — including those that bring claims in the future related to CMS’s selection of drugs for 2027 and onward, — will attempt to center Loper Bright in their arguments that parts of CMS’s implementing guidance, to the extent not supported by a clear delegation of authority in the IRA, are invalid. In that sense, Loper Bright may breathe new life into challenges to the Negotiation Program.

Looking Forward: The Trump Administration and the Negotiation Program

The election of President Trump has raised questions about the future of the Negotiation Program and the IRA more broadly. Congressional Republicans, who gained control of the Senate and maintained control of the House of Representatives, have been critical of the Negotiation Program since the IRA was passed. Unsurprisingly, the US pharmaceutical industry appears to be aggressively lobbying the new administration, which has various mechanisms to either repeal or undermine the Program.

The most substantial action the Trump administration could take would be to outright repeal the Negotiation Program via legislation. While Republicans only hold 52 seats in the Senate, short of the 60-vote filibuster-proof majority that would typically be needed to repeal a major law like the IRA, they would only need a simple majority in the Senate to repeal the law because it was passed under a Budget Resolution. Repeal of the Negotiation Program would arguably render the existing lawsuits moot.

The Trump administration is also now responsible for defending the law in federal court against the manufacturer lawsuits and could simply choose not to defend challenges to the law. However, the fact that the lawsuits involve constitutional claims that, if successful, could undermine the government’s ability to carry out other measures means the Trump administration has a broader incentive to continue aggressively defending the lawsuits against manufacturers. Further, the administration abandoning the government’s defense of the Negotiation Program would not necessarily result in a different outcome — federal courts can appoint amicus curiae, or “friends of the court,” to argue in favor of a law's constitutionality. As we’ve noted, federal courts have thus far rejected the manufacturers’ claims on the merits, and the federal government removing itself from the defense of the Program would not necessarily change how courts have analyzed the claims.

Finally, the Trump administration could also modify the Negotiation Program via agency guidance. Under President Biden, HHS has entirely implemented the Negotiation Program via subregulatory guidance, a decision that has been challenged (unsuccessfully) by manufacturers. While implementing the Negotiation Program via guidance had the benefit of expediency for the Biden administration, it also means that the Trump administration now has broad discretion to modify the Program to address manufacturer complaints about how drugs are deemed eligible for negotiation.

If recent history is a guide, speculating on the future of the Negotiation Program with any certainty is an exercise in folly. However, reporting by news organizations (which is consistent with what Mintz’s consulting group, ML Strategies, has heard) indicates the new administration’s approach to the Negotiation Program is more likely to involve modifications to certain aspects of the Negotiation Program rather than outright repeal or abandoning the defense of the lawsuits. For one, while President Trump has made broader statements about repealing portions of the IRA, notably, he has not publicly addressed how his administration’s approach to the Negotiation Program will differ from the Biden administration’s. Instead, his criticisms of the IRA have focused on the environmental provisions of the law. Further, on January 29, CMS published a short statement indicating that the new administration will continue the Negotiation Program. The statement also notes that CMS is “considering opportunities to bring greater transparency in the Negotiation Program” and would give stakeholders an opportunity to provide specific ideas to improve the Negotiation Program. The same day CMS released the statement, President Trump’s nominee to lead HHS, Robert F. Kennedy Jr., stated during his nomination hearing that the White House had issued an executive order on the Negotiation Program — although it appears he was mistakenly referring to the CMS statement. Otherwise, Mr. Kennedy did not provide substantive responses to the various questions on the Negotiation Program he received from several senators.

The new administration’s apparent reluctance to attach the Negotiation Program may be explained by the fact that it is broadly popular among the general public. One recent Kaiser Family Foundation poll  shows that 65% of Democrats, 54% of Independents, and even 48% of Republicans support expanding the number of drugs the federal government negotiates. There are obvious parallels to previous attempts to repeal the Affordable Care Act during the first Trump administration, which appear to have failed in part due to the ACA’s growing popularity at the time.

There are also indications from Trump’s first term in office that are informative. The first Trump administration’s rhetoric and proposals related to lowering drug prices were surprisingly aggressive. For example, prior to leaving office, the Trump administration’s HHS proposed a Most Favored Nation (MFN)  Model that would have capped the price of Medicare Part B drugs and biologics at the lowest price that a drug could receive in other similar countries. Senator Bernie Sanders (I-VT) has championed the broader use of MFN pricing for years, including most recently in a bill proposed in 2023.

Another signal that the Negotiation Program will be subject to tweaks rather than outright repeal comes from the reporting on pharmaceutical industry lobbying of the Trump administration. By all indications, drug lobbyists have focused on delaying the timeline (i.e., bona fide marketing standard) and formula (i.e., Qualifying Single Source Drug) used for determining a drug’s eligibility for negotiation rather than outright pushing for the Trump administration to eliminate the Program.

As noted, however, anything short of outright repeal will not necessarily address the broader constitutional challenges to the Negotiation Program. As such, the litigation over the Negotiation Program will likely continue. 
 

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