The US Supreme Court on Monday rejected a series of appeals from several of the nation’s largest drugmakers challenging a program that is expected to save taxpayers and the federal government billions of dollars by requiring the companies to negotiate with Medicare on the prices for some of their most popular drugs.
The court’s decision to deny the appeals, which it made without explanation, leaves in place several lower court rulings upholding the program that Congress enacted in 2022. Other lawsuits over the program are still pending.
At issue is a provision in the 2022 Inflation Reduction Act that allows Medicare to negotiate the prices of certain drugs for the first time after years of debate about whether such negotiation would effectively be government price fixing. Yet the rising cost of prescription drugs has added financial pressure on Medicare and its beneficiaries.
The drugmakers, including AstraZeneca and Janssen, said the program leads to a “sham negotiation” that violates their due process rights. Most also argued that the program violates the First Amendment because it compels them to “adopt the government’s narrative” of a negotiated agreement. Lower courts have rejected those arguments, noting that the companies are free to pull their products from government health programs.
In 2021 alone, the Trump administration told the Supreme Court, the federal government spent more than $250 billion on drugs covered by Medicare.
The first round of negotiations involved 10 drugs and is expected to lead to $6 billion in savings for the federal government and a $1.5 billion reduction in out-of-pocket costs for seniors, the Biden administration announced in 2024. The prices took effect in January.
Those drugs included Farxiga, made by AstraZeneca, which is used to treat diabetes, heart disease and kidney disease. Another drug included in that first round was Eliquis, a blood thinner made by Bristol Myers Squibb that is used to treat and prevent blood clots and strokes. For Farxiga, AstraZeneca told the Supreme Court that the negotiated process at the center of the case resulted in a 68% discount off its list price.
The second round, which covered 15 drugs, is projected to save Medicare about $12 billion and reduce enrollees’ out-of-pocket costs by $685 million when prices take effect next January, the Trump administration said in November. Negotiations for the third round are underway.
The medications are chosen from a list of eligible drugs with the highest total Medicare spending.
‘Grasping at constitutional straws’
Drugmakers and their allies have been fighting the Medicare drug price negotiations program in court for the past three years. Multiple lawsuits were filed in different districts across the US. All the decisions to date have gone against the industry, with judges ruling that participation in Medicare is voluntary and the companies are free to withdraw if they don’t like the price the government is offering.
Among the legal challenges the manufacturers are making are that they are being forced to give their drugs to Medicare without just compensation, said Andrew Twinamatsiko, director of the Center for Health Policy and the Law at Georgetown University’s O’Neill Institute. That, the drug companies say, amounts to an unconstitutional “taking” in violation of the 5th Amendment.
If the companies don’t agree to the negotiated price, they would either have to withdraw from Medicare and Medicaid – huge markets for the industry – or pay hefty excise taxes.
The drugmakers also argue they are being compelled to agree to the negotiated prices, though they say they are actually doing so under protest. The companies also claim that the Centers for Medicare and Medicaid Services is exceeding its authority, and that Congress did not provide a public comment period for the initial rounds of negotiations, depriving the industry of due process.
The drugmakers arrived at the Supreme Court at a disadvantage. Because no lower courts had backed their position, they were unable to demonstrate that the federal appeals court had split over the constitutional questions they raised. The Supreme Court often looks for a split among lower courts before granting a case.
“The challenges that the industry presented were weak in law. They were grasping at constitutional straws,” Twinamatsiko said.
Twinamatsiko and a colleague wrote in a Health Affairs article in March that federal courts have “spoken unequivocally” on the constitutional questions presented by the pharma companies’ cases.
“The government may condition participation in voluntary federal programs on acceptance of its pricing terms without violating takings, speech, or due process rights when formal exit options exist,” they said, describing the lower courts’ theory of the cases.