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Johnson & Johnson filed a lawsuit against the Biden administration on Tuesday regarding Medicare’s new authority to reduce drug prices. This marks the third pharmaceutical company to challenge this controversial provision of the Inflation Reduction Act.
The lawsuit, which was filed in a federal district court in New Jersey, argues that the Medicare negotiations violate the First and Fifth Amendments of the U.S. Constitution.
Earlier, Merck and Bristol Myers Squibb, as well as the U.S. Chamber of Commerce and PhRMA, the pharmaceutical industry’s largest lobbying group, filed separate suits with similar arguments.
Johnson & Johnson’s complaint seeks to prevent the U.S. Health and Human Services Department from compelling the company to participate in the program.
According to J&J, the lawsuit aims to stop the “innovation-damaging congressional overreach that threatens the United States’ primacy in developing transformative therapies and in patients’ access to those treatments.”
The Inflation Reduction Act, signed into law by President Joe Biden in 2022, grants Medicare the authority to negotiate drug prices for the first time in the program’s six-decade history. This provision aims to make drugs more affordable for older Americans but may reduce pharmaceutical industry profits.
The Health and Human Services Department will select 10 drugs for the initial round of price negotiations. The list of selected drugs for the first cycle of negotiations will be published by the Centers for Medicare and Medicaid Services on September 1. The companies that manufacture these drugs will have until October to sign agreements to participate in the negotiations.
J&J argues that the provision forces the company to make “false and misleading statements” by agreeing that the federal government is negotiating fair drug prices. This, in J&J’s view, violates the First Amendment.
The company claims that true negotiations involve both parties freely agreeing on terms, and the provision’s unilateral dictation of drug prices by the government does not meet that criteria.
HHS has yet to respond to CNBC’s request for comment.
J&J stated that their drug Xarelto, used for treating blood clots and reducing the risk of stroke, will be subject to price negotiations in 2023 as it is among the 10 most widely reimbursed drugs for Medicare Part D patients.
J&J argues that the Medicare negotiations result in the company being forced to provide access to Xarelto on terms set by the government, terms that the company would never willingly agree to. They claim that this violates the Fifth Amendment, which protects against the government seizing private property without just compensation.
In the last fiscal year, J&J generated $2.47 billion in revenue from Xarelto.
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