Denial of Motion to Dismiss and Motion for Preliminary Injunction in Chambers of Commerce case

On Friday, September 29, the court in Dayton Area Chamber of Commerce et al. v. Becerra et al. (S.D. Ohio, Judge Newman) issued the first substantive order addressing legal challenges to the Drug Price Negotiation Program of the Inflation Reduction Act.  The plaintiffs in the Chambers of Commerce case were the only plaintiffs among the various parties challenging the IRA to file a motion for a preliminary injunction, on the basis that the statute violated the due process clause of the Fifth Amendment.  The government in turn filed a motion to dismiss the case for lack of subject matter jurisdiction.  The court heard oral argument on the motions on September 15, and on September 29 issued an order denying both motions.

Defendants’ Motion to Dismiss

The government moved to dismiss the Complaint on several grounds.

1. First, the government argued that the alleged injuries identified in the Complaint are speculative because they are based on prices that have yet to be negotiated.
2. Second, the government argued that Plaintiffs failed to establish associational standing because (a) two of the four Plaintiffs failed to identify any specific member with standing, and (b) the other two Plaintiffs identified only one member, AbbVie, as having a concrete and particularized injury due to the (then-predicted, now verified) inclusion of IMBRUVICA in the Program; but AbbVie is not the “manufacturer” of IMBRUVICA (its wholly owned subsidiary, Pharmacyclics, is the NDA holder), and therefore would not suffer the alleged harms.
3. Third, the government argued that the requested relief would require participation by individual members because the pendency of multiple suits brought by individual manufacturers, at least one of whom (Merck) appears to be a member of one of the Plaintiff associations in this case, undermines the court’s ability to render a judgment that provides association-wide relief.
4. Fourth, the government argued that the claims are not ripe because any harm that would affect AbbVie would not occur until 2026, and the alleged injuries are dependent on circumstances that may or may not occur.

The court ordered that “the most efficient and appropriate way forward is to permit Plaintiffs to amend their initial complaint and allow the parties to move forward with limited discovery.”  The court stated that “it is in the interest of justice” to allow Plaintiffs to amend the Complaint to:

1. “further clarify the specific details” regarding the injuries “that, in their view, establish standing” and “to update the Court…about any additional factual developments that may have an impact on Plaintiffs’ standing” (Order at 15)
2. “identify specific members of [the Ohio Chamber of Commerce and the Michigan Chamber of Commerce] who they claim are manufacturers of the drugs selected for the Program” and “clarify whether AbbVie is indeed the manufacturer of IMBRUVICA® which will be subject to the Program’s requirements” (Order at 13)
3. “explain why individual participation is not needed in this instance,” (Order at 17) and
4. “demonstrate that each of their claims is ripe for review and justiciable.” (Order at 18).

Per the court’s order, the Plaintiffs have until October 13, 2023 to file an amended complaint.  Any renewed motion to dismiss from the government must be filed by October 27, 2023.  The court noted that if no renewed motion to dismiss is filed, it will consider arguments regarding standing on review of summary judgment.  The court also ordered a 60-day period for limited discovery.

Plaintiffs’ Motion for Preliminary Injunction

On the Plaintiffs’ motion for a preliminary injunction, the court found that Plaintiffs had failed to demonstrate a strong likelihood of success or irreparable harm.

• On likelihood of success, the court stated that even assuming arguendo that Plaintiffs had standing, they failed to show a strong likelihood of success: “to warrant injunctive relief, Plaintiffs must show that no set of circumstances exist where the Program would be constitutionally valid under the Fifth Amendment Due Process Clause.  They have not done so.”  The court rejected Plaintiffs’ argument that the Program “will constrain its members to be subject to confiscatory rates,” (Op. at 22) stating that it is well established that “participation in Medicare, no matter how vital it may be to a business model, is a completely voluntary choice.”  (Op. at 23).  The court agreed with the government that the Sixth Circuit case on which the Plaintiffs relied, Michigan Bell, “is inapplicable because voluntary programs like Medicare cannot, as a matter of law, yield confiscatory rates.”  (Op. at 22).
• The court also found that Plaintiffs had failed to show irreparable harm.   The court stated that to the extent the Plaintiffs relied on harm already incurred—i.e. the costs of providing information to CMS by the October 2, 2023 deadline—“[i]t is unclear to the Court…how granting the injunction would remedy any alleged injury that has already occurred.”  As to the Plaintiffs’ allegations of future harm, the court stated: “there is no certainty that any harm will occur if the Program continues and Plaintiffs comply with it,”  (Op. at 25) and the harms alleged are “not immediate’ and “too speculative” to warrant preliminary injunctive relief. (Op. at 27).

Plaintiffs have the ability to file an immediate interlocutory appeal of the order denying their motion for a preliminary injunction.

The Chambers of Commerce opinion came just days ahead of the October 1, 2023 deadline for companies to enter an agreement with CMS to “negotiate” a “maximum fair price.”  All companies whose drugs were selected for the first round of the Program have agreed to “negotiate” with CMS.  See Novo Nordisk, Johnson & Johnson, Amgen and Novartis agree to participate in Medicare negotiations – Endpoints News (endpts.com); https://www.cnbc.com/2023/10/02/drugmakers-agree-to-medicare-price-negotiations-whats-next.html.  Today, October 2, is the statutory deadline for companies to provide certain information to CMS to facilitate the negotiation process.  As discussed in our earlier post providing an overview of the IRA the statute imposes a daily “excise tax” on manufacturers that do not agree to negotiate or provide the required information.

New Complaint by Novo Nordisk

Also on Friday, Novo filed a new Complaint challenging the Drug Price Negotiation Program and CMS’s actions in implementing it.  The Complaint alleges that (I) the IRA violates the separation of powers and the Due Process Clause of the Fifth Amendment, (II) the IRA compels speech in violation of the First Amendment, (III) CMS’s guidance document and template agreement violate the APA and Medicare statutes, and (IV) CMS’s actions in implementing the Program exceed the scope of authority granted by Congress.  Novo’s Complaint is the ninth pending legal challenge to the Drug Price Negotiation Program, and the fourth filed in the District of New Jersey.  

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