The pharmaceutical industry’s counterattack against Medicare’s new drug pricing powers widened Friday with AstraZeneca joining several of its drugmaker peers in suing the U.S. government.
In a 44-page lawsuit, the British company claims Medicare is unlawfully implementing provisions of last year’s Inflation Reduction Act, which for the first time gave the agency the authority to negotiate prices of certain top-selling drugs.
AstraZeneca also alleges the law’s drug pricing provisions are unconstitutional, an argument made in several different ways by Merck & Co., Bristol Myers Squibb, Johnson & Johnson, Astellas and Boehringer Ingelheim in previous lawsuits.
Known as the IRA for short, the law directs Medicare to identify drugs on which it spends the most that are so-called “single source,” or lacking generic competitors, and are either nine or 13 years removed from U.S. approval. The agency then has the power to negotiate for a lower price, initially for 10 medicines in 2026 and then expanding to cover more each year after.
AstraZeneca and the other drugmakers that have sued argue that the process laid out by the IRA is a negotiation in name only. Under the law, drugmakers that refuse the lower price offered by Medicare are subject to a heavy tax that’s avoidable only if companies withdraw their products from the government insurance program.
“The IRA forces manufacturers to engage in purported ‘negotiations’ but affords them no bargaining power, no meaningful opportunity to walk away, and no ability to protect their interests against a so-called ‘maximum fair price’ capped at an amount drastically below actual fair market value,” AstraZeneca wrote in its suit, which was filed in U.S. District Court for the District of Delaware.
The company’s lawsuit comes the week before the Biden administration is set to make public its list of the 10 medicines that will be initially subject to negotiated prices in 2026. AstraZeneca’s asthma treatment Symbicort is viewed by some as likely to be on the list.
AstraZeneca claims the IRA’s drug pricing provisions violate the Fifth Amendment’s due process protection, similar to arguments made by Astellas, J&J and Boehringer. However, the company dedicates much of its case to alleging Medicare has violated the IRA itself in how it’s interpreted the law in regulatory guidance issued earlier this year.
Specifically, AstraZeneca alleges Medicare unlawfully defined a “single source” drug under the IRA as applying to all dosage and formulations of a specific active drug ingredient. For instance, capsule and tablet versions of the drug ingredient approved by the Food and Drug Administration via different applications would be considered the same product, making both eligible for price negotiation at the same time.
According to AstraZeneca, this could apply to newer formulations of its cancer drugs Lynparza and Calquence.
More broadly, AstraZeneca claims the IRA undermines the Orphan Drug Act, which established incentives for drugmakers to develop treatments for rare diseases. That law has proved a powerful catalyst, spurring billions of dollars of drugmaker research into new treatments for uncommon conditions.
The IRA exempts approved orphan drugs from negotiation, but only if they’re cleared for a single use. Typically, drugmakers develop orphan drugs for several different, but related diseases.
“The IRA’s stingy approach to orphan products generates real risk that future treatment breakthroughs will be jeopardized, particularly for therapies with the potential to treat multiple orphan conditions, undermining patient access to meaningful treatment options and life-saving therapies,” AstraZeneca writes in its suit.
The issue is particularly meaningful to AstraZeneca, which spent $39 billion in 2020 to buy rare disease drugmaker Alexion Pharmaceuticals.
AstraZeneca is asking the court to declare Medicare’s IRA guidance documents as unlawful and the IRA as unconstitutional. It’s seeking an expedited briefing to allow for a faster decision.