Judge rejects challenges by J&J and Bristol Myers Squibb to Medicare drug price negotiations

A federal judge in New Jersey refused on Monday Johnson & Johnson's and Bristol Myers SquibbThe administration mounts legal challenges to the Biden administration's Medicare pricing negotiations, ruling this system is constitutional.

The decision is one other victory for the White House in a bitter legal battle with several drugmakers over price negotiations. The ruling also weakens the drug industry's strategy of looking for separate rulings in lower courts scattered across the U.S., which could lead to the matter moving to the Supreme Court.

Medicare drug price negotiations are a key measure under President Joe Biden's Inflation Reduction Act, which goals to make expensive drugs more cost-effective for seniors. This could reduce drug manufacturers' profits. Final negotiated prices for the primary round of negotiated drugs, which include one each from J&J and Bristol Myers, will take effect in 2026.

J&J plans to appeal the choice, a spokesperson said in an announcement to CNBC.

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

Bristol Myers Squibb didn’t immediately reply to requests for comment on the ruling.

In separate lawsuits, the drugmakers argued that the negotiations constituted an unconstitutional government seizure of their drugs and a violation of their right to free speech. They also argued that the interviews were an unconstitutional requirement for participation within the Medicaid and Medicare programs.

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

The negotiations didn’t require drugmakers to “defer, hold, or otherwise reserve their drugs for use by the government or Medicare recipients,” he wrote. Quraishi added that the talks wouldn’t force manufacturers to physically transport or transport drugs at a renegotiated price.

“Selling to Medicare may be less profitable than it was before the program was implemented, but that doesn’t make sense.” [J&J and Bristol Myers Squibb’s] “The decision to participate is less voluntary,” Quraishi wrote. “For the reasons presented, the court concludes that the program does not result in either physical ingestion or direct appropriation” of medicines from the 2 drug manufacturers.

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

That same month, a federal judge in Delaware rejected AstraZeneca's separate lawsuit difficult the negotiations. In Texas, a 3rd federal judge dismissed a separate lawsuit in February.

A federal judge in Ohio also issued a ruling in September rejecting an injunction from the Chamber of Commerce, one in all the country's largest lobbying groups, that sought to dam price negotiations before Oct. 1.