Preliminary Injunction Decision in Chambers of Commerce Case Provides First Insights Into Merits of Medicare Negotiations CasesOctober 5, 2023
Last week, a federal court in Ohio denied a preliminary injunction motion by four Chambers of Commerce in their lawsuit against the Medicare Drug Price Negotiation Program. The motion was based on the Plaintiffs’ Fifth Amendment due process argument: that absent preliminary relief, Plaintiffs and their members will suffer imminent, irreparable constitutional harm. The lawsuit was the only one of the challenges to the Negotiation Program that sought preliminary injunctive relief and the only one filed in the Sixth Circuit. Nevertheless, Judge Newman’s decision here gives us our first insights into the merits of the challenges against the Program.
To issue a motion for preliminary injunctive relief, a court must find that the Plaintiff has a strong likelihood of success on the merits of the underlying case. Here, Plaintiffs had the burden to show that “no set of circumstances exist where the Program would be constitutionally valid under the Fifth Amendment Due Process Clause.” Order at 21. While this standard is different from the standard applicable to the underlying cases, some of the analysis coincides with those cases.
The Plaintiffs argued the unconstitutionality of the Medicare Negotiation Program under the Fifth Amendment by relying on Michigan Bell v. Engler, a 2001 decision by the Sixth Circuit Court of Appeals. In that case, the court enjoined a Michigan state law that sought to freeze and abolish a customer fee because the law did not adequately safeguard against “confiscatory rates” or ensure a “fair and reasonable rate of return on investment” as required by the constitution. See Motion at 11. However, Judge Newman distinguished Michigan Bell from the present case because the Michigan law, which compelled participation by the plaintiff telephone companies, denied them of their right to a “fair and reasonable rate of return.” Order at 22. As such, that statute was unjust, confiscatory and violated their constitutional due process rights. Id. In contrast, Judge Newman found that Sixth Circuit (and Eighth Circuit) law established that “participation in Medicare, no matter how vital it may be to a business model, is a completely voluntary choice.” Id. at 23. “Because Plaintiffs are not legally compelled to participate in the Program—or in Medicare generally—they have not shown a strong likelihood of success on the merits of their due process case.” According to the court, the Constitution guarantees no right to conduct business with the government, so the consequences of that participation can be “conditioned by regulation” without being considered unconstitutional. Id.
The court did not make much of Plaintiff’s argument that a manufacturer cannot terminate its participation in Medicare for close to two years, see Motion at 8; Complaint at 27-28, potentially dismissing it as a mere administrative matter. See Order at 23 (the Medicare Negotiations cannot be considered confiscatory “because pharmaceutical manufacturers who do not wish to participate in the Program have the ability—practical or not—to opt out of Medicare entirely.”).
The Defendants questioned, and the court reviewed, Plaintiffs’ standing. Recall that the Plaintiffs claim associational standing on behalf of their “members that will be directly subject to the IRA’s price controls.” Complaint at 10. The Plaintiffs “expected” their member, AbbVie, to be forced to enter negotiations with the Secretary, disclose competitively sensitive proprietary information about its drug, Imbruvica, and agree to CMS’s prices for it. The drug was indeed selected on August 29, 2023.
The court considered the parties’ arguments as to whether standing should be determined based on the four corners of the complaint or beyond; whether AbbVie or its wholly owned subsidiary, Pharmacyclics, is the “manufacturer” of Imbruvica and therefore the relevant party for litigation; and whether Plaintiffs’ member, AbbVie, could suffer an injury. Eventually, in the interest of justice, the court acknowledged that it could not “tell with certainty whether or not Plaintiffs have standing to raise each of their claims . . . at this early juncture in the litigation,” and asked the Plaintiffs to submit an amended complaint to further clarify with any additional factual developments. See Order at 15, 21.
The Plaintiffs in the remaining five lawsuits (Merck, Bristol Myers Squibb, PhRMA and other trade associations, Janssen pharmaceutical, and Boehringer Ingelheim) might similarly amend their complaints to note that their drugs were in fact selected, and that they were compelled to sign contracts with the CMS. Note that Astellas withdrew its lawsuit after none of its drugs were selected for price reduction in 2026—potentially because that fact cut against its argument for standing.
The Court reviewed the parties’ arguments on “irreparable harm to Plaintiffs.” This inquiry may not be as relevant to the underlying cases themselves but, as before, brought up some early indications of how a judge will review allegations of legal and constitutional harm. Judge Newman explained that, under Sixth Circuit precedent, “[e]conomic loss does not constitute irreparable harm, in and of itself.” Order at 24. In any case, no Court can provide relief from economic harm that has already occurred because sovereign immunity bars the court from granting damages. Id. at 25. As for future harm, the Court concluded that “the harm alleged is not immediate, and it is too speculative to stop the Program through preliminary injunctive relief.” Id. at 27.
More importantly, the Court noted that the Plaintiffs’ member, AbbVie, does not know what the maximum fair price will be and how it will be determined. “[T]here is no certainty that any harm will occur if the Program continues and Plaintiffs comply with it” and any economic harm “will not occur for years in the future.” Id. at 26. Because the ultimate maximum fair price cannot be predicted with accuracy, and also because of the uncertainty regarding who is affected by the program, the court refused to find “irreparable harm.”