Today, the district court for the District of Delaware (Judge Connolly) granted the government’s motion for summary judgment on all claims brought by AstraZeneca in its Complaint challenging the Drug Price Negotiation Program of the IRA.

AstraZeneca raised three challenges to the IRA’s Drug Price Negotiation Program:

Counts I and II challenged two aspects of CMS’s interpretation–as laid out in CMS Guidance–of the term “qualifying single source drugs,” which defines the universe of drugs that are eligible to be selected into the Program.

As background: the IRA defines “qualifying single source drugs” as drugs that are, among other things, (a) approved or licensed under the NDA or BLA provisions of the FDCA or BPCIA and (b) not the reference product for any generic or biosimilar that is “approved and marketed” (or “licensed and marketed”) pursuant to an ANDA or aBLA.

Count I of AstraZeneca’s Complaint challenged CMS’s interpretation of “qualifying single source drug.”  In its Guidance document explaining how it will implement the Program, CMS explained that it will identify “qualifying single source drugs” using “all dosage forms and strengths of the drug with the same active moiety and the same holder of an [NDA], inclusive of products that are marketed pursuant to different NDAs” (and for biologics: using “all dosage forms and strengths of the biological product with the same active ingredient and the same holder of a [BLA] inclusive of products that are marketed pursuant to different BLAs”).   AstraZeneca alleged that CMS’s approach violates the Administrative Procedure Act because it improperly departs from the statutory definition by sweeping in products approved under distinct NDAs/BLAs that otherwise would not be eligible to be selected for the Program.

Count II of AstraZeneca’s Complaint challenged CMS’s approach to determining when a drug is considered to be a reference product of a biosimilar or generic that is “approved and marketed” (and therefore is not eligible for selection into the Program).  CMS’s Guidance provides that to determine whether a biosimilar or generic is “marketed,” CMS will look at the “totality of the circumstances,” including Part D and Medicaid data for the biosimilar over a rolling 12-month period, to determine whether the manufacturer of the biosimilar is engaged in “bona fide marketing” of the product.  AstraZeneca challenged that approach as adopting standards not authorized by the IRA and therefore violating the Administrative Procedure Act.

In Count III, AstraZeneca alleged that the IRA violates the Fifth Amendment’s Due Process Clause by depriving AstraZeneca of “two constitutionally protected property interests: its investment-backed patent rights and common-law right to sell its products at market prices free from arbitrary and inadequately disclosed governmental constraints,” (Am. Complaint ¶ 142) without affording adequate procedural safeguards.

The Court Dismissed Counts I and II (APA Claims) for Lack of Jurisdiction

The district court held that AstraZeneca lacked standing to bring its two APA claims because it failed to establish a legally sufficient injury.  The district court rejected four theories of standing advanced by AstraZeneca:

(1) As to Count I: AstraZeneca alleged that CMS’s interpretation of “qualifying single source drug” decreased AstraZeneca’s incentives to develop new uses for its selected drug FARXIGA, as any new innovations would immediately become subject to the Program’s pricing requirements.  The district court held that this was neither a concrete injury nor an imminent one as it was “premised on a hypothetical scenario” that the record evidence showed “is extremely unlikely to occur.” (Op. 22).

(2) As to Count II, the court held the alleged injury of being subject to mandatory pricing under the IRA after the launch of generic versions of FARXIGA is in some circumstances a result of the IRA statute—not an injury imposed by CMS’s Guidance—and in other circumstances is speculative or unlikely.

(3) As to both Counts I and II, the court held that the alleged injury of CMS’s Guidance “negatively affect[ing]” AstraZeneca’s “current decision-making about other drugs” is “too vague to establish a cognizable injury.” (Op. 31).

(4) As to both Counts I and II, the court held that AstraZeneca’s alleged uncertainty in approaching their counteroffer to the government’s initial price offer was of its own making: “The only uncertainty relating to the Guidance comes from the filing of this lawsuit.” (Op. 33).

The Court Granted Summary Judgment on Count III (Due Process Claim)

The district court granted summary judgment for the government on AstraZeneca’s Due Process claim because it held as a matter of law that “the ability to sell…drugs to Medicare” at prices above the “maximum fair prices” established under the IRA is not a protected property interest.   Although AstraZeneca also alleged that the IRA unlawfully deprived it of its protected interest in “patent rights,” the court rejected that as a basis for a Due Process claim, stating that AstraZeneca “never identifie[d] a patent or explain[ed] how the IRA affects or could affect a patent right.”  (Op. 39-40).  The court concluded: “Because AstraZeneca’s participation in Medicare is not involuntary, AstraZeneca does not have a protected property interest in selling drugs to the Government at prices the Government will not agree to pay.” (Op. 44).

***

Judge Connolly’s opinion follows an hours-long oral argument held on Jan. 31, 2024.  AstraZeneca had requested the court issue its decision on the parties’ dispositive motions on or before today—in advance of the deadline for AstraZeneca (and other manufacturers of selected drugs) to respond to the government’s initial “maximum fair price” proposal.

The AstraZeneca decision marks the second judgment ending a challenge to the IRA.  As we covered previously, the challenge brought by PhRMA and other organizations was dismissed earlier this year for lack of standing.  There are now seven remaining lawsuits challenging the Drug Price Negotiation Program of the IRA.  In four of those cases (BMS, Janssen, Novartis, and Novo Nordisk, which are all pending before Judge Quraishi in the District of New Jersey, the court has scheduled oral argument on the various dispositive motions in those cases to be held on March 7th.

For more information and background on the various pending legal challenges to the Inflation Reduction Act, please visit our IRA Resource Page and check out our previous posts here and here.

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