The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) have filed lawsuits against the US government for its recently issued drug-pricing rule that uses a Most Favored Nation (MFN) drug-payment model that would set the price for certain prescription drugs under the US government’s Medicare healthcare program to comparable pricing in other developed countries.

The new rule was issued last month (November 2020) by the US Department of Health and Human Services (HHS) Secretary Alex Azar as part of a policy by the Trump Administration to address the cost of prescription drugs in the US. It follows up on an executive order issued by President Donald Trump earlier this year (2020) that authorized the HHS Secretary to develop and implement a rulemaking plan for the MFN model. The MFN rule is based on drug-payment model through the Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services that lowers Medicare Part B payments for certain prescription drugs to the lowest price found in similar countries. Part B of Medicare, the US government’s health insurance program for individuals 65 or older, covers a limited number of outpatient prescription drugs that are administered in limited conditions, such as a doctor’s office, hospital, or other clinical setting. 

Under the new rule, starting in January (2021), the HHS will use the MFN model to test a way for Medicare to pay no more for physician-administered Medicare Part B drugs than the lowest price charged in other similar countries. The model will apply to 50 drugs and biologicals, and the test will run for seven years.

PhRMA, which represents large innovator and research-based pharmaceutical companies, says the rule exceeds the statutory authority provided to the Centers for Medicare and Medicaid Services, raises serious constitutional questions, and improperly fails to follow required rulemaking procedures. “The Most Favored Nation Interim Final Rule is bad policy that is contrary to law and that the Administration expressly admits will disrupt patients’ access to medicines,” said PhRMA Executive Vice President and General Counsel James C. Stansel in a December 4, 2020 statement. “By pushing through a nationwide, mandatory policy change, the Administration is essentially rewriting the Medicare statute. It is circumventing Congress entirely, ignoring the roles assigned to the executive and legislative branches. The US Constitution is clear: The Administration does not have the legal authority to write new laws or override existing laws through regulations. Laws must be passed by both chambers of Congress and signed by the President.”

The basis of PhRMA’s lawsuit centers on three key claims: (1) The Administration exceeded the authority granted to the Center for Medicare & Medicaid Innovation under the Affordable Care Act; (2) the Administration violated the US Constitution by using a regulatory process to rewrite the Medicare statute and transform the reimbursement system for physician-administered medicines in the US; and (3) the Administration failed to demonstrate the “good cause” required for the interim final rule to skip notice-and-comment procedures in rulemaking. In its lawsuit, PhRMA is seeking to enjoin enforcement of the MFN rule, obtain a declaration that the rule is unconstitutional, and invalid, and other relief.

BIO filed its lawsuit on similar grounds. “There are several arguments outlined in the complaint, including HHS’ attempt to implement this plan without prior notice or opportunity for public comment, and its acknowledgement, in its own rule, that it cannot estimate the impact it will have on patients and providers, said BIO in a December 4, 2020 statement. “The complaint also argues that HHS lacks the authority to make sweeping changes to statutory Medicare rules through administrative fiat.”

Dr. Michelle McMurry-Heath, BIO President and CEO also criticized the MFN rule for the negative impact that it would have in terms of healthcare and on the biotechnology industry. “As the President’s own team of economic advisors has indicated, not only will this rule have profound effects on patients’ ability to access important and life-saving medications, it will also dramatically hinder the operational capacity of America’s vibrant biotech companies–particularly smaller operations spearheading cutting-edge biomedical research,” she said in BIO’s statement.

PhRMA was joined in its suit by the Association of Community Cancer Centers, an education and advocacy organization, the Global Colon Cancer Association, a nonprofit organization, and National Infusion Center Association, a nonprofit trade association. BIO was joined in its suit by the California Life Sciences Association, a life sciences-advocacy and business leadership organization, and Biocom California, an association representing the California life-science industry. PhRMA and BIO filed lawsuits in Maryland and California, respectively.

Source: PhRMA, BIO, and the US Department of Health and Human Services