Key points
- Johnson & Johnson (J&J) has filed a lawsuit against the Biden administration over Medicare’s new powers to negotiate drug prices, becoming the third pharmaceutical company to challenge this provision.
- J&J argues that the Medicare negotiations violate the First and Fifth Amendments of the U.S. Constitution and aims to block the U.S. Health and Human Services Department from compelling their participation in the program.
- The provision in question is part of President Joe Biden’s Inflation Reduction Act, which enables Medicare to negotiate drug prices for the first time, potentially reducing pharmaceutical industry profits. The lawsuit challenges the government’s authority to dictate drug prices and raises concerns about infringement on J&J’s rights.
Johnson & Johnson (J&J) has filed a lawsuit against the Biden administration, becoming the third pharmaceutical company to challenge the Medicare drug price reduction provision of the Inflation Reduction Act. The lawsuit, filed in federal district court in New Jersey, argues that the Medicare negotiations violate the First and Fifth Amendments of the U.S. Constitution.
The company’s complaint seeks to block the U.S. Health and Human Services Department from compelling J&J to participate in the program, referring to it as “innovation-damaging congressional overreach.” J&J claims that the provision forces them to make “false and misleading statements” about drug prices, violating their First Amendment rights.
President Joe Biden’s Inflation Reduction Act, passed in 2022, empowers Medicare to negotiate drug prices for the first time, aiming to make medications more affordable for older Americans but potentially reducing pharmaceutical industry profits. The Health and Human Services Department will select 10 drugs for the initial round of negotiations, and the Centers for Medicare and Medicaid Services will publish the list on September 1.
J&J argues that the provision infringes on their Fifth Amendment rights, claiming it amounts to an “uncompensated physical taking” of their drug, Xarelto, and forces the company to provide access on terms set by the government. Xarelto, which treats blood clots and reduces the risk of stroke, generated $2.47 billion in revenue for J&J last year.
The pharmaceutical industry has been pushing back against the Medicare drug price negotiations, with Merck and Bristol Myers Squibb previously filing separate lawsuits making similar arguments. The U.S. Chamber of Commerce and PhRMA, the pharmaceutical industry’s largest lobbying group, have also challenged the provision.
At the time of reporting, the U.S. Health and Human Services Department had not responded to CNBC’s request for comment on the lawsuit. As the legal battle unfolds, the outcome will have significant implications for the future of drug pricing and negotiations within the Medicare program.