| It’s likely that the pharmaceutical industry’s legal threats to the very existence of Medicare’s drug-negotiation program are dead — but that doesn’t mean drugmakers are giving up. The backdrop: A federal appeals court on Wednesday handed the industry yet another loss. And the case — filed by the drug industry’s most prominent and well-heeled association, the Pharmaceutical Research and Manufacturers of America (PhRMA) — is the last of the roughly two dozen lawsuits filed by pharma companies and business groups that challenged the constitutionality of the program. PhRMA, of course, could now ask the Supreme Court to step in and counter — but the high court has previously declined to get involved when asked by companies such as AstraZeneca, and zero cases have gone pharma’s way, decreasing the likelihood that the Supreme Court would take up the challenge. “This fight has always been about power. For decades, the pharmaceutical industry prevented Medicare from negotiating a better deal for American patients and taxpayers,” said Merith Basey, the CEO of advocacy group Patients for Affordable Drugs, in a statement about the ruling. “The 5th Circuit’s decision marks the 25th courtroom victory for patients and sends a clear message: Medicare Drug Price Negotiation is here to stay,” Basey added. Technically, yes. But while PhRMA isn’t commenting on its next steps, the industry has provided clues to other legal avenues it may pursue to chip away at the Inflation Reduction Act’s signature drug-pricing provisions. What’s next: “Having failed to take down the program as a whole, [drugmakers] are going to pivot to bring discrete challenges to the program,” Andrew Twinamatsiko, a director of the Center for Health Policy and the Law at Georgetown Law who studies pharmaceutical litigation, tells me. INDUSTRY RX There is a ban on judicial review of the decisions that the Centers for Medicare and Medicaid Services makes when selecting drugs for negotiation. But a federal circuit court may have opened the door to potential challenges of how regulators ultimately get to those decisions. - Last week, Teva Pharmaceuticals scored a partial legal victory in one of its niche challenges to provisions in the Inflation Reduction Act.
A federal appeals court in Washington, D.C., preserved a key piece of the Medicare drug-negotiation framework by saying that CMS was simply abiding by the law’s requirements when it lumped two versions of the same drug together for the purposes of negotiation. However, it gave Teva an opening on a separate issue: whether CMS can require a generic version of a drug to be meaningfully on the market before it can be used to keep the brand-name version out of Medicare negotiations — taking aim at the so-called “bona fide marketing” standard. The court sent that question back to the district court. Earlier this year, AbbVie sued the federal government, arguing that Botox — which has been selected as one of the medications in this year’s round of price negotiations — should be exempt. Botox is a “plasma-derived product,” which the company notes is a category of drugs exempted from negotiations under the Inflation Reduction Act. Botox’s label notes that the product — used to treat wrinkles, chronic migraines and overactive bladder — contains “albumin, a derivative of human blood.” (Medicare does not cover Botox for cosmetic purposes.) In June, government lawyers defended Botox’s selection for negotiation, saying that the drug’s active ingredient is Botulinum Toxin Type A, and “it is undisputed that Botulinum Toxin Type A is not ‘derived from human whole blood or plasma,’” so the exemption doesn’t qualify. → But wait, there’s more: In a comment letter to CMS about the first permanent regulations for the Medicare drug-price negotiation program that was filed last week, PhRMA suggested several potential targets for litigation. This includes how regulators define what’s called a “qualifying single source drug” that may have the same active ingredient, but different dosages or formulations, when choosing high-cost treatments for negotiation. While the Teva case upheld the way CMS groups these treatments together for the purposes of Medicare negotiation, another court could view it differently should another drugmaker try to challenge the scope. The Villages Health System has agreed to pay the federal government $541.5 million to settle allegations that it improperly increased Medicare Advantage payments by adding unsupported medical diagnoses to patients’ records. But, in a twist, the case began with the provider itself: The Florida-based health care provider disclosed the billing problem to the Department of Health and Human Services’ Office of Inspector General in December 2024, and said it was working to repay Medicare. Here’s what went down, according to the Justice Department: - The Villages Health System said it discovered that, beginning in 2020, employees had gone back into patients’ medical records after their visits to add diagnoses that could increase Medicare payments. Some changes were allegedly made months or more than a year after the original visit.
- The provider hired outside counsel to investigate in August 2024, then reviewed its records and found that many of the added diagnoses could not be adequately supported by patients’ medical records.
- The outside review found that 29 percent of the diagnoses examined from 2020 were unsupported, rising to 51 percent in 2024.
Why it matters: The practice of exaggerating patient diagnoses to maximize Medicare Advantage revenue, known as upcoding, has been a persistent target for critics of the program who argue it wastes billions of dollars in federal funds each year. Last July, Villages Health filed for Chapter 11 bankruptcy. But the settlement could have been much pricier: The Villages Health System received credit from the Justice Department for voluntarily disclosing the conduct, cooperating with the government and taking steps to address the problem. CenterWell, Humana’s health services arm, acquired Villages Health System last November. But the $541.5 million payment will be treated as a claim against the Villages Health’s bankruptcy estate — not CenterWell or Humana — and cannot be wiped away through bankruptcy, a Humana spokesperson said. “The Villages Health is now a part of CenterWell Senior Primary Care, and all operations are conducted in compliance with all applicable laws and regulations,” the spokesperson added. Make sure to tune in for a conversation between my WP Intelligence colleagues and policy experts about the role — and potential threats — of artificial intelligence in biotech on Friday morning at 11 a.m. Eastern time. They’ll be discussing questions such as: - How is AI changing the bioterror threat?
- Can policymakers put guardrails around AI-enabled biology without hampering medical innovation?
- Are companies and research institutions moving fast enough to manage the risk?
Click here to learn more about the virtual event, secure your spot and add your question to the queue. “RFK Jr. said a Samoa trip had nothing to do with vaccines. New documents refute that,” Ali Swenson reports at the Associated Press. “Hospitals are plotting a long-shot push to roll back $1 trillion in Medicaid cuts,” STAT’s Daniel Payne writes in the second in a series of stories about the challenges associated with Medicaid cuts. “Lilly’s move to hide Phase 1 pipeline draws mixed reviews,” Kyle LaHucik writes at Endpoints News. “Nation’s largest nurses union to protest Palantir in 8 cities,” Giles Bruce writes at Becker’s Health IT. This newsletter is published by WP Intelligence, The Washington Post’s subscription service for professionals that provides business, policy and thought leaders with actionable insights. WP Intelligence operates independently from The Washington Post newsroom. Learn more about WP Intelligence. | 
