Appeals Court Rejects Novo Nordisk Challenge to Medicare Drug Pricing Plan

A federal appeals court on Oct. 6 rejected a challenge from Novo Nordisk to the Medicare drug pricing plan included in the Biden-era Inflation Reduction Act (IRA).

The plan does not violate the Constitution’s First Amendment, a unanimous panel of judges from the U.S. Court of Appeals for the Third Circuit said in a 22-page decision.

They also turned away other arguments from Novo Nordisk, in part because the law enacting the plan precludes judicial review of certain aspects, such as price selection.

Part of the IRA, passed by Congress and signed by then-President Joe Biden in 2022, the Drug Price Negotiation Program requires health officials to negotiate prices for Medicare—the insurance program that covers the elderly and younger people with disabilities—with drug manufacturers.

Under the program, officials set a “maximum fair price” for each drug selected. Some of Novo Nordisk’s products, including NovoLog, were selected for negotiations in 2023. The law included prices for certain drugs that officials could not exceed in their negotiations.

Once officials and manufacturers sign an agreement, manufacturers must provide the drug to Medicare recipients at the agreed-upon cost, or face fines.

Manufacturers can choose not to participate in the program; however, if they continue to provide drugs to Medicare, they must pay a daily tax. That amounts to “an escape hatch,” the appeals court panel stated.

The panel upheld a ruling from U.S. District Judge Zahid Quraishi, who in 2023 sided with the government and said Novo Nordisk was not forced to participate in the program and that the program did not compel its speech.

Similar rulings have come against other drugmakers that filed suits over the program, including Novartis and Bristol Myers Squibb.

In May, a Third Circuit panel rejected an appeal from AstraZeneca, finding that AstraZeneca failed to identify decisions it made to protect some of its drugs from being subject to negotiations.

“Absent an injury-in-fact, AstraZeneca lacks Article III standing to challenge the Guidance,” the panel said at the time.

AstraZeneca in September asked the Supreme Court to weigh in, with lawyers alleging the program “compels pharmaceutical manufacturers to sell their most innovative and widely used medicines at prices unilaterally chosen by” health officials, and that drugmakers cannot just walk away from the offered prices because of the tax to which they would be subjected.

“The manufacturer’s only alternative is to withdraw all its drugs from Medicare and Medicaid—depriving patients nationwide of access to critical medicines and foreclosing nearly half the U.S. prescription-drug market,” AstraZeneca said in its petition to the court.

The government has until Nov. 24 to respond.