Activists protest prescription drug prices in front of the U.S. Department of Health and Human Services (HHS) building on October 6, 2022 in Washington, DC.
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A federal judge on Monday dismissed a lawsuit filed by a major pharmaceutical industry lobbying group and two other organizations that challenged Medicare's new powers to negotiate prices for expensive prescription drugs.
The decision is an early victory for the Biden administration as it grapples with a series of other legal challenges drugmakers have filed against Medicare drug price negotiations. Key policies under the Inflation Reduction Act aim to make medications more affordable for seniors and reduce pharmaceutical industry profits.
The judge's ruling will not end the legal battle over the policy, which could end up in the Supreme Court. Medicare earlier this month issued its initial drug price offers to manufacturers for the first 10 drugs subject to the talks, with final negotiated prices set to take effect in 2026.
U.S. Judge David Ezra of the Western District of Texas sided with the Biden administration in dismissing the lawsuit from the Pharmaceutical Research and Manufacturers of America, or PhRMA, the Global Colon Cancer Association and the National Infusion Center Association, who argued that the price talks were unconstitutional.
In a 14-page ruling, Ezra specifically dismissed the National Infusion Center Association (NICA) from the case, arguing that the court has no jurisdiction over the group's legal challenge. He wrote that NICA's claims are covered by the Medicare Act and can only be heard in court after an administrative review by the federal agency.
Ezra dismissed the remainder of the case, as NICA is the only plaintiff in the district.
PhRMA is “disappointed with the court's decision, which does not address the merits of our lawsuit, and we are weighing our next legal steps,” spokesperson Nicole Longo told CNBC in a statement. PhRMA represents many of the world's largest drug manufacturers, including Eli Lilly, Pfizer And Johnson & Johnson.
But PhRMA and the two other organizations could appeal the decision. Legal experts say the pharmaceutical industry hopes to obtain conflicting rulings from federal appeals courts, which could quickly move the issue to the Supreme Court.
A list of major drug companies selected for negotiations, including J&J, MerckAnd Bristol Myers Squibb, have filed separate lawsuits challenging the constitutionality of the price talks. Those cases are still pending.
Notably, a federal judge in Ohio issued a ruling in September denying a preliminary injunction sought by the Chamber of Commerce, one of the largest lobbying groups in the country. which aimed to block price talks before October 1.
PhRMA, NICA and the Global Colon Cancer Association filed their lawsuit in June, claiming the negotiations delegate too much authority to the Department of Health and Human Services.
The lawsuit also argued that the price talks violate the Eighth Amendment because they include a “crippling” excise tax aimed at forcing drug makers to accept the government's dictated price of drugs.
The groups also argued that the price talks violate due process by denying pharmaceutical companies and public input on how Medicare negotiations will be implemented.
Justice Department attorneys on behalf of the Department of Health and Human Services have countered that NICA has no reputation because it does not make or sell prescription drugs that are negotiable.