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PhRMA sues Biden administration over Medicare drug negotiations

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Traders work on the floor of the New York Stock Exchange during morning trading on April 10, 2023 in New York City.

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The pharmaceutical industry’s largest lobbying group and two other organizations on Wednesday sued the Biden Administration over Medicare’s new powers to slash drug prices for seniors under the Inflation Reduction Act. 

Pharmaceutical Research and Manufacturers of America, along with the National Infusion Center Association and the Global Colon Cancer Association, argue that the Medicare negotiations with drugmakers violate the U.S. Constitution, in a complaint filed in federal district court in Texas. 

PhRMA represents many of the largest drugmakers in the world, including Eli Lilly, Pfizer and Johnson & Johnson

The groups asked the court to declare the program unconstitutional and prevent the Department of Health and Human Services from implementing Medicare negotiations without “adequate procedural protections” for drug manufacturers. 

HHS did not immediately respond to CNBC’s request for comment. 

It marks the fourth lawsuit challenging the controversial provision of the Inflation Reduction Act, which became law last summer in a major victory for President Joe Biden and Democratic lawmakers.

The policy aims to make drugs more affordable for older Americans, but will likely reduce pharmaceutical industry profits. Merck and Bristol Myers Squibb – who are also represented by PhRMA – and the U.S. Chamber of Commerce filed separate lawsuits against the provision earlier this month. 

The latest lawsuit argues that the plan delegates too much authority to the Department of Health and Human Services. 

PhRMA and the two organizations also argue that the provision includes a “crippling” excise tax aimed at forcing drugmakers to accept the government-dictated price of medicines, making it an excessive fine prohibited by the Eighth Amendment. 

The lawsuit also argues that the policy violates due process by denying pharmaceutical companies and the public input on how Medicare negotiations will be implemented. 

“The price setting scheme in the Inflation Reduction Act is bad policy that threatens continued research and development and patients’ access to medicines,” PhRMA CEO Stephen Ubl said in a statement. 

“It also violates the U.S. Constitution because it includes barriers to transparency and accountability, hands the executive branch unfettered discretion to set the price of medicines in Medicare and relies on an absurd enforcement mechanism to force compliance,” Ubl said.

The first 10 drugs that the provision applies to will be chosen in September, with the agreed prices taking effect in 2026. 

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