Regeneron sues U.S. to stop Medicare drug pricing rule
Regeneron Pharmaceuticals Inc. says that a new drug-pricing rule championed by President Donald Trump will devastate U.S. pharma if implemented next year.
The Tarrytown company sued the U.S. Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services on Dec. 11 in U.S. District Court, White Plains, claiming that the Most Favored Nation Model of drug pricing is illegal.
Under the new rule, Medicare Part B drug payments would be pegged to the lowest prices paid in large, developed countries, rather than on the costs of developing and producing medicines.
Trump has called the new rule “groundbreaking” and declared that it will “transform the way the U.S. government pays for drugs.”
Regeneron argues that price controls will discourage investments in new drugs and could lead to drug shortages.
Regeneron, founded in 1988, has developed several drugs, including Eylea, a treatment for macular degeneration and other retinal diseases.
The Food and Drug Administration recently authorized emergency use of Regeneron”™s coronavirus treatment, a cocktail of monoclonal antibodies that might be effective in fighting infections.
Trump was given the experimental drugs in October when he was treated for Covid-19. The president called the drugs a “cure,” but Regeneron has emphasized that they are still being tested.
Regeneron said it took 20 years and $1.3 billion to bring its first medicine to market.
Pharmaceutical companies can invest such enormous sums, according to the lawsuit, because they can get it back if the drug is successful.
U.S. Congress has “left drug pricing largely to the law of supply and demand,” the complaint states, “thus creating incentives for drug developers to expend the resources necessary for cutting-edge innovation.”
Foreign governments, on the other hand, often dictate drug prices, according to Regeneron, covering manufacturing costs but not development costs.
On Sept. 13, the president issued an executive order, directing Health and Human Services to implement a new Medicare drug pricing rule. On Nov. 20, CMS released the 258-page Most Favored Nation Model.
The rule covers 50 drugs that generally cost the government the most, including Regeneron”™s Eylea.
Beginning Jan. 1, the government will pay health care providers the lowest price paid by the strongest economies in the Organisation for Economic Cooperation and Development, a global forum of 37 countries that promotes economic growth.
CMS has singled out Eylea, according to the complaint, as costing twice as much as comparison countries. Trump has stated that the new rule will produce “colossal savings” of 50% to 80%.
Regeneron said it cannot control prices outside of the U.S. because Bayer licenses Eylea and markets it to other nations.
Trump can claim that the new rule is the “granddaddy” of the “most far-reaching prescription drug reforms ever issued,” Regeneron argues, because it is unlawful.
First, the rule was issued without submitting to a notice-and-comment process, as required by the Administrative Procedures and the Medicare Act.
Second, the only statutory authority cited is an obscure provision of the Affordable Care Act that lets the government test new payment and service delivery models. Yet, the Trump administration has asked the Supreme Court to strike down the entire Affordable Care Act.
Third, the rule is arbitrary and capricious. The government failed to consider adverse effects on innovation, for instance, or the fact that companies such as Regeneron do not control foreign pricing.
Fourth, it violates the Constitution”™s separation of powers principles, by overriding legislative authority.
“Congress has refused to impose price controls because it recognizes that although price controls may be politically popular at first blush,” the complaint states, “such a policy would not in fact benefit the United States, given the deleterious effects ”¦ on supply and innovation.”
The lawsuit also cites violations of the First Amendment, due process, Foreign Commerce Clause, and the taking of private property for public use without just compensation.
Katie McKeogh, press secretary for Health and Human Services, said in an email that the agency does not comment on pending litigation.
U.S. District Judge Kenneth M. Karas has scheduled a hearing for Dec. 22 to consider enjoining or temporarily restraining the government from implementing the new rule.
Regeneron is represented by several Kirkland & Ellis attorneys in Washington, D.C., and Manhattan.