Appeals Court Rejects AstraZeneca’s Challenge to IRA Negotiation Program

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A federal appeals court has handed down the first substantive appellate ruling on the validity of the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program, upholding the law.

The decision comes in a challenge by AstraZeneca, whose product Farxiga was one of the 10 drugs selected for the first year of negotiation. In its case, AstraZeneca raised constitutional challenges to the law, claiming that the negotiation provisions deny it due process and infringe on property rights by limiting the ability to sell at a market rate. The U.S. Court of Appeals for the Third Circuit rejected this argument, noting that “There is no protected property interest in selling goods to Medicare beneficiaries . . . at a price higher than what the government is willing to pay . . . .” Likewise, the court did not agree that the law’s prohibitions on judicial review of CMS’ implementation was a violation of the constitution’s guarantee of due process, distinguishing the negotiation from private market transaction price controls that traditionally must be subject to review.

AstraZeneca also raised objections to elements of CMS’ implementation guidance, specifically CMS rules for defining qualifying single source drugs based on active ingredient or moiety, and requiring “bona fide” marketing of a drug’s generic before declaring that drug no longer eligible for negotiation. Like the district court before, the Court of Appeals declined to address these arguments on standing grounds, because the court concluded that neither rule caused a concrete and particularized injury to AstraZeneca.

AstraZeneca may now request “en banc” review of this decision by all active judges of the Third Circuit or by the Supreme Court. Meanwhile, challenges by other manufacturers selected for the negotiation program are winding their way through the courts. Several other cases are before Courts of Appeal and decisions in those cases could come soon.

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