Latest Medicare negotiations lawsuit questions the definition of a drug
Illustration: Sarah Grillo/Axios
Novo Nordisk, the latest drug company to challenge the Inflation Reduction Act's Medicare negotiation provisions in court, is making a legal argument that could force a judge to grapple with the very definition of a drug.
Why it matters: Any of the nine pending lawsuits could potentially stop the implementation of the law, regardless of whether they're challenging its constitutionality or the way the administration has implemented it thus far.
Driving the news: Novo Nordisk's lawsuit, filed late last month, argues that "CMS has substantially increased the number of drug and biological products subject to price controls, including products that do not satisfy the selection criteria dictated by Congress."
- It's referring to the inclusion of six Novo insulin products as one drug on CMS' list of the first 10 drugs subject to negotiation.
- "CMS has violated these clear and express mandates by treating all of a manufacturer's drug or biologic products containing the same active ingredient or active moiety as a single 'product' and sweeping them together into the price 'negotiation' process," the lawsuit adds.
The big picture: This fits with an emerging pattern in which drug companies argue not only that the IRA violates the constitution, but also that CMS is implementing it unlawfully.
- "What we've started to see ... is really ways to go after different implementation decisions and the guidance that CMS put out in terms of how to implement the program," said Zachary Baron, associate director of the Health Policy and the Law Initiative at Georgetown University's O'Neill Institute.
Yes, but: Congress also restricted judicial review of the agency's actions in the law, meaning Novo has to overcome that legal hurdle before a judge weighs the merits of its argument about grouping multiple products together.
- "Courts are loathe to generally set aside something that Congress carefully crafted, and it's not like this is an aberration of limiting judicial review of certain decisions," Baron said.
What they're saying: "If you define 'what is a drug' too narrowly, a company can make tiny shifts, declare it a 'new drug' and escape Medicare negotiations entirely. In fact, that is a classic strategy, often called evergreening," said Robin Feldman, a professor at the University of California Law San Francisco.
- In its lawsuit, "the company left out the key part of the statute. That's what the court will focus on interpreting," Feldman added.
- She pointed to language directing HHS to "use data that is aggregated across dosage forms and strengths of the drug, including new formulations of the drug, such as an extended release formulation, and not based on the specific formulation or package size or package type of the drug."
A spokesperson for CMS said the agency is unable to comment given the pending litigation, but pointed to guidance for the negotiation program from earlier this summer that defends its position.
What we're watching: Unless a judge tells it not to, CMS may continue bundling drugs in the years to come.
- "The definition of 'what is a drug?' will reverberate throughout the Medicare negotiations for years to come. Given the prevalence of evergreening in the industry, Medicare could choose to apply this definition to other aggregated products," Feldman said.
- And Novo gave a similar warning: The CMS "approach allows the agency to consolidate distinct groups of products that Congress expressly kept separate and condemns all future products that rely on the same active moiety or ingredient to the same government-imposed price controls, even though they are not yet on the market," it wrote in the lawsuit.
