Pharmaceutical Industry's Lawsuit Against Medicare Drug Price Negotiation Law Reinstated by U.S. Appeals Court

The lawsuit, spearheaded by the Pharmaceutical Research and Manufacturers of America (PhRMA), along with the Global Colon Cancer Association and the National Infusion Center Association (NICA), contends that the drug price negotiation framework established under the Inflation Reduction Act violates constitutional provisions by over-delegating authority to federal regulators and imposing disproportionate penalties on companies that refuse to participate in the program.

The 5th Circuit decision arises from a February ruling by U.S. District Judge David Ezra, who dismissed the case on the grounds that NICA, a Texas-based organization, was required to first pursue administrative remedies under Medicare law. However, the appeals court found that NICA’s claims were rooted in the Inflation Reduction Act, not Medicare, and this could proceed in court. Circuit Judges Jennifer Walker Elrod and Kyle Duncan, both Republican appointees, delivered the majority opinion, while Circuit Judge Irma Ramirez dissented. Despite ongoing litigation, the initial round of drug price negotiations went forward, with price reductions on several drugs set to take effect in 2026.