A federal appeals court has again rejected the pharmaceutical industry’s legal challenge to Medicare’s drug-price negotiation program, keeping the government on track to roll out a second round of lower prices on 15 drugs starting January 1. The Fifth Circuit Court of Appeals ruled against the Pharmaceutical Research and Manufacturers of America, marking the 25th consecutive courtroom loss for industry groups trying to overturn the program. For Medicare enrollees expected to use one of the newly negotiated drugs, the ruling removes one more legal obstacle between today’s price and the lower one due in four months.
The 25th Loss for Pharma’s Legal Campaign
The Fifth Circuit rejected a challenge brought by PhRMA, the pharmaceutical industry’s main trade association, along with the National Infusion Center Association and the Global Colon Cancer Association. PhRMA argued the negotiation program was unconstitutional and unlawfully penalized drug companies that chose not to participate in it. A unanimous three-judge panel — appointed by Presidents Bush, Obama and Trump — rejected those arguments in a ruling issued August 26.
The decision extends a losing streak for the industry that now spans the Second, Third, Fifth and D.C. Circuit Courts of Appeals, according to Patients For Affordable Drugs, a nonprofit advocacy group that has filed briefs supporting the government’s position in several of the cases. The organization’s CEO, Merith Basey, called the ruling proof that “Medicare Drug Price Negotiation is here to stay,” framing the years-long legal campaign as effectively exhausted at the appellate level.
The Fifth Circuit’s core reasoning mirrors what other circuits have found: participation in Medicare is voluntary, so a drug manufacturer that objects to negotiating is not legally required to sell its products through the program at all. That voluntary-participation logic has repeatedly defeated arguments that the program amounts to unconstitutional price-setting or an unlawful taking of private property.
The case reached the Fifth Circuit, which covers Texas, Louisiana and Mississippi, as part of a wave of lawsuits pharmaceutical companies and trade groups filed in multiple federal circuits shortly after the Inflation Reduction Act created the negotiation program in 2022. Filing in several circuits at once was widely read as an attempt to find at least one appellate panel sympathetic to the industry’s arguments; four circuits deciding against the program in the same basic terms undercuts that strategy.
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What Actually Changes for Enrollees on January 1
The ruling clears a legal cloud from the second round of the negotiation program, in which CMS has already selected 15 drugs for negotiated prices taking effect January 1, 2027. The list includes widely prescribed medications such as Ozempic, Rybelsus and Wegovy for diabetes and weight management, the respiratory drug Trelegy Ellipta, and the prostate cancer treatment Xtandi, among others CMS named when it announced the selections.
CMS has estimated the second round of negotiated prices will save Medicare Part D enrollees roughly $685 million in out-of-pocket costs once the new prices take effect, on top of the savings already flowing from the first round of ten negotiated drugs that took effect at the start of this year. The program covers drugs without generic or biosimilar competition that account for some of Medicare’s highest total spending.
The legal fights have not changed the negotiated prices themselves or the January 1 timeline for any drug currently selected; every court to rule so far has left the program’s substance intact while rejecting industry’s constitutional and statutory arguments against it. That consistency is why advocates describe this ruling as removing risk rather than adding a new benefit — the lower prices scheduled for January were already the expected outcome before this decision.
The Fight Isn’t Completely Over
The Fifth Circuit’s ruling adds to a pattern: the U.S. Court of Appeals for the D.C. Circuit rejected a challenge from Teva Pharmaceuticals in mid-August, and a District of Columbia federal court rejected Merck’s challenge three days before the Fifth Circuit acted. The U.S. Supreme Court already had a chance to intervene and passed: in May, the justices declined to hear petitions from AstraZeneca, Bristol Myers Squibb, Janssen, Novartis, Novo Nordisk and Boehringer Ingelheim seeking review of earlier losses.
The stakes of losing this fight are visible in the first round of negotiated prices, which already took effect this January. Merck’s diabetes drug Januvia, one of the first ten drugs selected, dropped from a $527 list price for a 30-day supply in 2023 to $113 under the negotiated price — a 79% cut that is part of a broader $1.5 billion in projected 2026 out-of-pocket savings for the roughly 9 million Medicare enrollees using one of those first ten drugs.
For now, the practical effect of four consecutive appellate losses — and a Supreme Court that has already declined to step in once — is that the program’s basic legal footing looks settled even if individual companies keep filing new challenges. Enrollees taking one of the 15 newly selected drugs have five months until the negotiated price arrives, and this ruling is the strongest signal yet that the January 1 date will hold regardless of how many more lawsuits the industry files in the meantime.
This article was researched and drafted with the assistance of artificial intelligence.
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