Major drug price reforms head for Biden’s signature as PhRMA weighs legal options

2 min
August 10, 2022

By Zachary Brennan

August 10, 2022

The fact that the new drug price negotiations for certain blockbuster Medicare drugs — due for a partisan thumbs up in the US House of Representatives on Friday and a signature from President Joe Biden soon after — don’t take effect until 2026 means there’ll be plenty of time for PhRMA and others in biopharma to weigh their legal options.

But what PhRMA or any biopharma company may potentially sue over will be the key, as legal experts point to the complicated negotiations side of the reconciliation bill, which beginning in 2026 would kick off these price concessions for 10 of the most expensive single-source drugs in Medicare’s Part D program, building up to about 60 drugs from both Part D and B by 2030, with prices generally capped by at least 40%.

Considerable attention by Congress has been paid to smaller companies and drugs and biologics with impending competition. For instance, in 2029 and 2030, there would be a maximum fair price floor of 66% of the average non-FAMP for small biotech companies’ biologics (compared to 75% for most drugs that have been on the market for less than 12 years), according to the law firm Hogan Lovells.

Still, if manufacturers fail or decline to comply with the negotiation process, they would be subject to a significant excise tax (building up from 65% of a drug’s sales to 95%), which is a stick so large that it could potentially run afoul of the excessive fines clause of the Eighth Amendment of the Constitution, legal experts said.

“Assuming the excise tax is not authorized by Congress’s taxing power alone and is actually a means of enforcing a regulatory drug pricing statutory scheme, it could be viewed as a punitive measure subject to the Excessive Fines Clause,” the Congressional Research Service wrote in a report back in 2019 on a similar drug pricing bill from House Speaker Nancy Pelosi.


Sean Dickson
Director, Health Policy