J&J, Bristol Myers Squibb lose Medicare drug-price talks challenges

A federal judge in New Jersey on Monday rejected Johnson & Johnson‘s and Bristol Myers Squibb‘s legal challenges to the Biden administration’s Medicare drug-price negotiations, ruling that the program is constitutional. 

The decision is another win for the White House in a bitter legal fight with several drugmakers over the price talks. The ruling also weakens the pharmaceutical industry’s strategy of seeking split decisions in lower courts scattered across the U.S., which could escalate the issue to the Supreme Court. 

Medicare drug-price negotiations are a key policy under President Joe Biden’s Inflation Reduction Act that aims to make costly medications more affordable for seniors. In doing so, it could take a bite out of drugmakers’ profits. Final negotiated prices for the first round of drugs subject to the talks, which includes one each from J&J and Bristol Myers, will go into effect in 2026. 

J&J plans to appeal the decision, a spokesperson said in a statement to CNBC.

“This is a disappointing ruling for patients and America’s leadership role in medical innovation,” they added.

Bristol Myers Squibb did not immediately respond to requests for comment on the ruling. 

In separate lawsuits, the drugmakers argued that the negotiations are an unconstitutional confiscation of their drugs by the government and a violation of their right to freedom of speech. They also argued that the talks are an unconstitutional condition to participate in the Medicaid and Medicare programs.

But Judge Zahid Quraishi of the District of New Jersey wrote in a 26-page opinion that participation in the price talks and Medicare and Medicaid markets is voluntary.

The negotiations don’t require drugmakers to “set aside, keep or otherwise reserve any of their drugs” for the use of the government or Medicare beneficiaries, he wrote. Quraishi added the talks don’t force manufacturers to physically transmit or transport drugs at a new negotiated price.

“Selling to Medicare may be less profitable than it was before the institution of the Program, but that does not make [J&J and Bristol Myers Squibb’s] decision to participate any less voluntary,” Quraishi wrote. “For the reasons provided, the Court concludes that the Program does not result in a physical taking nor direct appropriation” of medications from the two drugmakers. 

J&J, Bristol Myers Squibb, Novo Nordisk and Novartis presented their oral arguments before Quraishi during the same hearing in March.

That same month, a federal judge in Delaware rejected AstraZeneca’s separate lawsuit challenging the negotiations. In Texas, a third federal judge tossed a separate lawsuit in February.

A federal judge in Ohio also issued a ruling in September denying a preliminary injunction sought by the Chamber of Commerce, one of the largest lobbying groups in the country, which aimed to block the price talks before Oct. 1.