U.S. Supreme Court lets Medicare drug price curbs stand

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Supreme Court upholds Medicare drug pricing

Highlights

The U.S. Supreme Court declines to hear appeals from Novo Nordisk, AstraZeneca, Janssen Pharmaceuticals, Bristol Myers Squibb, Novartis, and Boehringer Ingelheim, leaving Medicare drug price curbs intact.
Under the Inflation Reduction Act of 2022, the first negotiated prices for 10 high-spending Medicare drugs take effect this year despite industry lawsuits.
Lower courts uphold the federal drug pricing program, rejecting claims on due process, free speech, and separation of powers, maintaining regulatory pressure on pharmaceutical companies.

High court leaves pricing program intact

As reported by Reuters, the U.S. Supreme Court declines to hear appeals from Novo Nordisk, AstraZeneca, Janssen Pharmaceuticals, Bristol Myers Squibb, Novartis and Boehringer Ingelheim over the federal plan to curb Medicare drug prices. The justices leave in place lower court rulings that reject the companies' legal claims against the program adopted during Joe Biden's administration as part of the Inflation Reduction Act of 2022.

The law targets certain medicines that generate high spending for Medicare, the U.S. health insurance program for people aged 65 or older. It requires manufacturers to negotiate a maximum price directly with the Centers for Medicare & Medicaid Services, or withdraw all of their drugs from those programs, while failure to reach an agreement can trigger steep daily excise taxes.

Despite multiple lawsuits, the first negotiated prices on 10 drugs go into effect this year. Republican President Donald Trump's administration is defending the program in court and presents it as part of its broader effort to reduce prescription drug costs.

Industry arguments and market impact

The six companies sue after CMS targets their medicines for price curbs, arguing the process is not a true negotiation but a mechanism for government-imposed price controls. The drugmakers also contend the plan violates Fifth Amendment protections on due process and compensation, as well as First Amendment protections by compelling them to endorse the government's view of fair drug prices.

Novo Nordisk separately argues that the law improperly delegates legislative authority to an executive branch agency, raising a separation-of-powers claim. Lower courts reject those arguments, with the 3rd U.S. Circuit Court of Appeals ruling for the government in five cases and the 2nd U.S. Circuit Court of Appeals doing the same in Boehringer Ingelheim's case.

The program remains significant for the pharmaceutical sector because U.S. consumers pay more for medicines than people in any other country, and Medicare coverage affects beneficiary premiums and out-of-pocket payments. CMS Administrator Mehmet Oz said in January that the agency is targeting the most expensive drugs in Medicare, underscoring that the pricing effort continues under the current administration.

Our earlier update on Novo Nordisk (NVO) focused on the stock’s near-term outlook amid strong U.S. demand signals for its GLP-1 drugs. We noted accelerating uptake of oral Wegovy, wider Ozempic distribution through Amazon’s delivery rollout, and a mostly sideways trading setup for NVO as technical indicators remained mixed despite positive operational news.

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