Court rules against Novo Nordisk on Medicare price negotiations

A federal appeals court has unanimously rejected Novo Nordisk’s challenge to Medicare’s drug price negotiation program, a ruling that will allow the government to group products containing the same ingredient together for the purpose of choosing which drugs to negotiate.

The pharmaceutical industry is on a losing streak on this issue, at least in the courts. Judges have ruled against drug companies at least 15 times since the law governing negotiations took effect in 2023, according to Patients for Affordable Drugs, which supports letting Medicare negotiate lower prices for drugs. In its cases, the industry alleged that the program ran afoul of the First Amendment’s speech protections, the Fifth Amendment’s requirement that the government follow due process before acquiring property or other rights, and the Eighth Amendment’s prohibition on “excessive” government fines.

Novo Nordisk’s lawsuit included an unusual challenge to how Medicare chooses which drugs to negotiate. Medicare was allowed to select 10 drugs for negotiation in its first year and is currently negotiating prices for 15 additional drugs. By the fourth year, 20 new drugs will be chosen, which will remain the maximum number of new drugs subject to negotiation each year.

This restriction on the number of eligible drugs is at the heart of the trial.

The Biden administration has ordered Medicare to count six of Novo’s insulin products as one because they contain the same active ingredient. Novo argued that the federal government should negotiate the price of each of its insulin products separately.

The three-judge panel of the U.S. Third Circuit Court of Appeals ruled that the Inflation Reduction Act, which created the program, does not allow courts to weigh in on Medicare’s drug selection. In effect, the move allows Medicare to negotiate lower prices for more drugs than it otherwise could.

The court’s decision could have a big impact because, although the lawsuit focuses on insulin products from the program’s first year, Medicare also bundled three of Novo’s successful diabetes and weight loss products – Ozempic, Rybelsus and Wegovy – into the second round of negotiations. Semaglutide is the active ingredient in all of them.

The decision could also bode well for a policy the Trump administration is considering that would build on legislation from the Biden administration. Medicare officials said this year that they may consider products eligible for the program even when a new ingredient is added to an old ingredient, if the combination does not result in a clinically significant difference.

Hyaluronidase combination biologics are a good example of products that could be affected by this policy. In recent years, several biologics have been reformulated with hyaluronidase so that they can be administered as rapid subcutaneous injections, rather than by intravenous infusion.

However, the Trump administration delayed the implementation of this policy for at least a year.