On Friday, a federal district court rejected British drug giant AstraZeneca’s claims that the 2022 Inflation Reduction Act’s (IRA) historic provisions imposing prescription drug price negotiations for pricey treatments covered by Medicare are unconstitutional. The Delaware judge’s ruling is a blow to the pharmaceutical industry, which had never been required to negotiate prices with regulators in the U.S. (a standard practice in other developed nations across the world) prior to the IRA’s enactment—and another turn in a legal fight that might escalate to the U.S. Supreme Court.

The ruling came on the eve of a critical deadline for drug manufacturers in the oncoming price negotiations, which will occur over the course of 2024 before newly negotiated prices go into effect in 2026. Pharma companies that make any of the 10 Medicare Part D-covered prescriptions subject to this year’s first-ever round of negotiations had until March 2 to accept or make a counter-offer to the Biden administration’s opening bid for the maximum fair prices for these drugs, which the Department of Health and Human Services (HHS) extended to the relevant drug makers (including AstraZeneca, Merck, Bristol Myers Squibb, Johnson & Johnson, Amgen, Bayer, and Eli Lilly) on February 1.

The list of treatments include common prescriptions used by elderly Medicare beneficiaries for everything from type 2 diabetes and heart failure to high blood pressure to kidney disease and pulmonary embolisms. It includes AstraZeneca’s Farxiga, a therapy for diabetes, chronic kidney disease, and heart failure that about 799,000 Medicare Part D beneficiaries used between June 2022 and May 2023. Medicare Part D, the taxpayer-funded health program’s prescription drug component, covered just under $3.27 billion of Farxiga’s prescription costs in that timespan, according to data from the federal Centers for Medicare & Medicaid Services (CMS).

Source: Centers for Medicare & Medicaid Services

Farxiga was AstraZeneca’s best-selling product in 2023, bringing in $5.96 billion in sales that year.

AstraZeneca said it was disappointed with the Delaware court’s ruling and would consider its options going forward in a statement. Other drug giants subject to this year’s negotiations and its industry allies are waging an all-out legal war on the IRA’s Medicare provisions, though the Friday decision is the latest rebuke to one legal tactic employed by the industry asserting the negotiations amounted to the government seizing companies’ protected property. The ruling rebuked claims of a due process violation, writing “because AstraZeneca has no legitimate claim of entitlement to sell its drugs to the Government at any price other than what the Government is willing to pay, its due process claim fails as a matter of law.”

In mid-February, a Senate health committee grilled the CEOs of Johnson & Johnson, Merck, and Bristol Myers Squibb on the United States’ skyhigh prescription drug prices, which the Medicare price negotiations are meant to keep in check after decades of industry carte blanche to set and hike prices as drug makers see fit. The CEOs, in keeping with the pharmaceutical industry’s historic responses to such criticism, argued price caps and negotiations will stifle innovation. Drug makers often point to other U.S. healthcare middlemen including insurers and pharmacy benefits managers as the real culprits for high out-of-pocket prescription costs borne by patients.

For now, there are three rounds of negotiations between the federal government and the makers of the 10 prescription drugs slated for this spring and summer through August 1. The Centers for Medicare & Medicaid Services is scheduled to unveil the final negotiated price maximums on September 1.

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