J&J sues Biden administration over Medicare drug negotiations

Johnson & Johnson on Tuesday sued the Biden administration over Medicare’s new powers to slash drug prices, making it the third pharmaceutical company to challenge the controversial provision of the Inflation Reduction Act.  

The lawsuit filed in federal district court in New Jersey argues the Medicare negotiations violate the First and Fifth Amendments of the U.S. Constitution.

Earlier suits brought separately by Merck and Bristol Myers Squibb, as well as by the U.S. Chamber of Commerce and PhRMA, the pharmaceutical industry’s largest lobbying group, made similar arguments.

J&J’s complaint asks a judge to block the U.S. Health and Human Services Department from compelling the drugmaker to participate in the program.

The suit aims to stop the “innovation-damaging congressional overreach that threatens the United States’ primacy in developing transformative therapies and in patients’ access to those treatments,” according to J&J.

President Joe Biden’s Inflation Reduction Act, which passed in 2022 by a narrow party-line vote, empowered Medicare to negotiate drug prices for the first time in the program’s six-decade history. The policy aims to make drugs more affordable for older Americans but will likely reduce pharmaceutical industry profits. 

The Health and Human Services Department did not immediately respond to CNBC’s request for comment. 

J&J said its drug Xarelto, which treats blood clots and reduces the risk of stroke, will be subject to Medicare price negotiations in 2023.

J&J argues that Medicare negotiations “inflict an uncompensated physical taking” of the company’s drug and essentially forces J&J to provide access to Xarelto on terms set by the federal government that the company “would never voluntarily” agree to.

The company last year booked $2.47 billion in revenue from Xarelto.

This story is developing. Please check back for updates.