Novartis sues U.S. government over IRA price negotiations for Entresto

Novartis, Inflation Reduction Act, Entresto, Centers for Medicare & Medicaid Services (CMS)

Novartis has taken legal action against the U.S. government in response to the Inflation Reduction Act (IRA), becoming the latest pharmaceutical giant to do so. The company filed its lawsuit in a New Jersey federal court shortly after the Centers for Medicare & Medicaid Services (CMS) revealed that Novartis’ heart failure treatment, Entresto, was among 10 drugs slated for price negotiations in 2026.

Novartis joins a growing list of biopharma companies, including Astellas, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Johnson & Johnson, and Merck, that have filed separate lawsuits against the IRA. Most of these firms have at least one blockbuster drug affected by the initial round of price negotiations.

These lawsuits share similar language, with Novartis characterizing the negotiation process as a “sham” and denouncing the tax imposed on companies that charge more than the negotiated price as “draconian” and “wildly disproportionate to the punished conduct.”

Novartis’ lawsuit contends that the Medicare negotiation framework represents an “unprecedented and unconstitutional attempt to compel the nation’s drug manufacturers to sell their products at prices dramatically below their market value.” The company argues that this constitutes an “unconstitutional taking of private property,” violating the Fifth Amendment, while also infringing upon rights established in the First Amendment and the Eighth Amendment.

Regarding Entresto, Novartis claims that over 70% of its sales come from CMS, and it estimates that at least a quarter of the drug’s market value will be lost through price negotiation. The drug generated $4.6 billion in sales last year, marking a 37% increase from 2021.

Novartis also contends that the IRA will jeopardize its ability to conduct research and develop innovative drugs, potentially harming millions of patients who rely on the pharmaceutical industry for life-saving treatments.

The CMS has designated several drugs for negotiation, including Stelara, Xarelto, and Imbruvica from Johnson & Johnson, as well as Eliquis (Pfizer/Bristol Myers Squibb), Enbrel (Amgen), Farxiga (AstraZeneca), Januvia (Merck), Jardiance (Boehringer Ingelheim/Eli Lilly), and Novolog (Novo Nordisk). Legal analysts anticipate that companies with drugs on the negotiation list will adjust their lawsuits to specify the financial implications of CMS negotiations. They also expect these companies to file injunctions and requests for summary judgments in September 2024 when the CMS announces proposed prices for the top 10 drugs. Additionally, companies not yet involved in lawsuits may join existing cases, and there is a possibility that judges may attempt to consolidate the litigation.

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