Listen to this articleThe basics:
- Third Circuit upholds lower court rulings against J&J, Bristol Myers, Novartis
- Program allows Medicare to negotiate drug prices under the IRA, saving seniors billions
- First round of negotiated prices starts 2026; discounts range 38%-79% on top drugs
- Pharma industry’s legal fight continues, Supreme Court last potential avenue
A federal appeals court in Philadelphia rejected challenges by some of New Jersey’s biggest pharmaceutical companies questioning the legality of the federal government requiring drug makers to negotiate with Medicare on drug prices.
In separate rulings this month, the U.S. Court of Appeals for the Third Circuit upheld a New Jersey federal judge’s decision to toss lawsuits from Johnson & Johnson, Bristol Myers Squibb and Novartis against the Medicare Drug Price Negotiation program established by the Inflation Reduction Act.
Since the program was unveiled by the White House in 2022 as part of President Joe Biden’s signature IRA, several pharma giants have taken legal action over the drug pricing requirements. Lawsuits to block the law have been unsuccessful, so far.
While the cases vary in detail, each alleges that the government is overreaching in its authority. They mostly hinge on whether the drug price program is constitutional under the First and Fifth amendments. They also say allowing Medicare to negotiate prices would lead to lower profits, causing reduced spending in research and development.
Latest rulings
In tossing motions by Novartis, BMS and Johnson & Johnson, the Third Circuit said it found the program does not compel speech and that no physical taking occurs, because companies can end participation in Medicare and Medicaid to avoid the excise tax levied if they do not adhere to drug pricing mandated by the negotiation program.
In addition to recently dismissing those appeals, the same three-judge panel quashed a challenge last May by AstraZeneca. It is now weighing an appeal from Novo Nordisk, a Danish drugmaker with a Plainsboro presence.
Fierce Pharma noted that the Sept. 11 decision regarding Novartis was unanimous, while the Sept. 4 ruling for Bristol-Myers Squibb and Johnson & Johnson was split.
Judge Thomas Hardiman, a George W. Bush appointee, registered a dissenting opinion in that appeal. The other judges on the panel are Biden appointee Arianna Freeman and President Donald Trump appointee Peter Phipps.
Firm reactions
In a statement to NJBIZ, a Novartis spokesperson said, “Novartis continues to believe the IRA’s drug price-setting provisions are unconstitutional and will have long-lasting negative consequences for patients. The provisions undermine the ability to discover and develop life-changing therapies for the people who need them the most. Novartis is disappointed by the Court’s decision and is evaluating next steps.”
A BMS representative shared with NJBIZ, “Since the IRA’s inception, we have expressed serious concerns about the impact government price setting will have on America’s leadership in biopharmaceutical R&D and the development of future medicines that can help patients prevail over serious disease, in addition to its violation of the Constitution. BMS is steadfast in our commitment to innovation, access and affordability, and we remain focused on bringing groundbreaking medicines to patients.
“While Bristol Myers Squibb is disappointed with the result in the Third Circuit ruling related to the Company’s court case and plans to appeal to the U.S. Supreme Court, we appreciate that the dissenting opinion recognized the merits of our arguments,” the BMS representative added.
A media representative for J&J did not immediately respond to a request for comment.
Let’s make a deal
Through the Medicare Drug Price Negotiation Program, the federal government aims to drive down the cost of prescription drugs for older Americans.
As part of the initiative, the Centers for Medicare and Medicaid Services can directly negotiate with pharmaceutical companies over prices. Participation is voluntary, but companies who choose not to engage face the option of paying excise taxes or terminating their relationship with Medicare.
By allowing Medicare to have a say in setting drug prices for the first time in its six-decade history, the Biden administration said it believed the program would provide relief to the 9 million seniors who currently pay up to $6,497 in out-of-pocket costs per year.
Medications from many New Jersey drug makers – including Eliquis (Bristol-Myers Squibb), Xarelto (Johnson & Johnson), Januvia (Merck), Entresto (Novartis), Farxiga (Bristol-Myers Squibb) and NovoLog (Novo Nordisk) – were among the first 10 drugs selected in August 2023 for the inaugural round of negotiations.
Despite suing the federal government over the program, those companies all said they’d take part in price-setting talks.
$1.5B in senior savings
After months of discussions, the Biden administration reached a deal in August 2024 to lower the cost for some of the most popular and expensive drugs under Medicare. As a result, officials said they secured discounts ranging from 38% to 79% off list prices for medications that treat conditions such as heart disease, diabetes and cancer.
After the prices go into effect in 2026, the changes expect to save seniors and other Medicare Part D enrollees $1.5 billion in out-of-pocket costs in the first year. Projections also anticipate a $6 billion savings in Medicare in year one, according to the federal government.
According to CMS, the second cycle of negotiations for 15 additional drugs covered under Part D are underway. That list includes Novo Nordisk’s wildly popular diabetes shot Ozempic and weight loss medication Wegovy, as well as medicines from Teva Pharmaceuticals, BMS and Merck.
The second round of negotiations ends Nov. 1. The agreed-upon prices become effective Jan. 1, 2027.
CMS will announce up to 15 additional drugs covered under Part D or payable under Part B for the third cycle of talks by Feb. 1, 2026.
‘Long-overdue relief’
The latest appellate decisions add to a series of defeats for the pharmaceutical industry’s fight against the program. The last lever remaining for drug makers is to seek an appeal from the U.S. Supreme Court.
Last month, the U.S. Court of Appeals for the Second Circuit in Connecticut reaffirmed a lower court’s ruling against Boehringer Ingelheim. On the same day, a federal panel in Texas ruled against lobbying group PhRMA in another IRA challenge.
After the most recent outcomes, national patient advocacy group People For Affordable Drugs (P4AD) counts 14 court decisions backing the price negotiation program.
In a statement, P4AD Executive Director Merith Basey said, “Big pharma’s legal arguments against the Medicare Negotiation Program continue to prove baseless, and their high-priced lawyers have once again lost in court. With the first round of lower negotiated prices set to take effect in January, and the second round of drugs to be announced in the coming weeks, more than 9 million patients are finally on the cusp of long-overdue relief.”
Editor’s note: This story was updated at 6:17 p.m. EST Sept. 19, 2025, to include a statement from Bristol Myers Squibb.
