Federal court hears first oral arguments in legal battle over Medicare negotiation

The Southern District Court of Ohio on Friday heard oral arguments from the federal government and the Chamber of Commerce in the latter’s lawsuit challenging the Medicare Drug Price Negotiation Program, with both sides rehashing long-held assertions.

The Chamber has requested that the Medicare negotiation program be blocked from operating, with the organization asking for a decision by Oct. 1, by which companies whose products have been named must sign an agreement if they choose to engage in the process.

Here are some of the key points that were argued on Friday:

Lack of standing

In a prior motion to dismiss, the federal government argued the Chamber of Commerce has no standing to file a lawsuit as it is not a pharmaceutical company itself and does not meet the standard for suing on behalf of one of its member organizations.

Attorneys speaking on behalf of the federal government took this argument further on Friday, noting that AbbVie, one of the member organizations that the Chamber has cited, was not named as one of the companies that have been asked to negotiate. Pharmacyclics, a subsidiary of Abbvie, has been asked to negotiate as its leukemia treatment Imbruvica was among the first 10 drugs named.

The defendants in the case called into question Pharmacyclics’ status as a member of the Chamber of Commerce, claiming it had not been known as a member until after the lawsuit was filed. Government lawyers argued that Pharmacyclics should be the entity to file a lawsuit, not AbbVie or the Chamber.

Attorneys arguing for the Chamber pushed back on this, arguing that the federal government, the Centers for Medicare and Medicaid Services in particular, has historically treated corporate entities and their subsidiaries as one.

Financial harm

The Chamber further argued that AbbVie itself was already experiencing financial harm due to the program, and as such talks have not begun yet and any prices that are set through the program will not go into effect until 2026. Many of the suits that have been filed against Medicare price negotiation have claimed harm has already occurred, though plaintiffs have been vague on the specifics.

During their opening arguments, lawyers speaking for the government notably and explicitly said they did not dispute the possibility that companies will experience “financial losses” due to the negotiation program, but also alluded to “certain benefits” that manufacturers will enjoy as well, without going into further detail.

What constitutes coercion

A reoccurring criticism running throughout the several lawsuits against Medicare negotiation has been that the consequences of not participating leave companies no choice but to engage in a process they disagree with.

Companies that don’t sign agreements to negotiate face possible excise taxes — which attorneys for the Chamber said no company would be able to pay — or would have to remove all their products from Medicare and end their relationship with the lucrative government program.

The government reiterated that the Medicare Drug Price Negotiation Program is voluntary and that “decades of settled precedents” have established that providers have no vested interest in future Medicare participation.

Government attorneys argued courts have previously found when nursing homes that are financially dependent on Medicare funding have gone out of business, there is no compulsion to remain in Medicare because it is a voluntary program and such businesses retain the option of going out of business. Essentially, the attorneys argued the threat of going defunct does not amount to a coercive action.

They further argued that this option to walk away from negotiations actually gave companies a degree of leverage in encouraging CMS to come up with a price manufacturers would deem acceptable.

Preliminary injunction

The Chamber has asked for a preliminary injunction on the Medicare negotiation program by Oct. 1.

The threshold for a preliminary injunction includes demonstrating that the requesting party will succeed in the case based on the merits, that it will suffer irreparable harm without an injunction, that the opposing party won’t suffer substantial harm if the injunction is granted and that it is within the public’s interest.

Based on their argument that the program is inherently unconstitutional, the Chamber said blocking it would be in the public’s interest. The Chamber attorneys also repeated the claim that AbbVie had already experienced “real costs that are unrecoverable” due to the program.

The government again fell back on its argument that AbbVie, the member on behalf of whom the Chamber has claimed to be suing, will not directly suffer harm and thus the criteria for an injunction had not been met.

Government attorneys further argued that considering that a final judgment in the case is likely to be issued before January 2026, when the negotiated prices go into effect and the potential financial harm could be incurred, an injunction is unnecessary.

U.S. District Judge Michael J. Newman said he appreciated the “high level of arguments” presented on Friday and acknowledged the “time constraints” in giving a decision on the request for a preliminary injunction within the next two weeks.