Drug Pricing Negotiation Program: Johnson & Johnson Joins Legal Battle Against US Government

Johnson & Johnson JNJ has reportedly taken legal action against the U.S. government, following the lead of other pharmaceutical companies aiming to obstruct a program that empowers the Medicare government health insurance plan to negotiate lower prices for medication. 

The pharmaceutical sector asserts that President Joe Biden's hallmark Inflation Reduction Act, which enables the drug price negotiation scheme, will limit profits and force companies to reduce the development of innovative new treatments.

As American citizens pay more for prescription drugs than any other nation, Reuters noted, the Biden administration anticipates annual savings of $25 billion by 2031 through having Medicare negotiate prices for some of the most expensive medications used by its beneficiaries, who are predominantly 65 and older.

A spokesperson for the U.S. Department of Health and Human Services said, "As the Secretary has already made clear, we will vigorously defend the President's drug price negotiation law, which is already helping to lower health care costs for seniors and people with disabilities. The law is on our side."

J&J's pharmaceutical division, Janssen, lodged its complaint in the U.S. District Court for the District of New Jersey. Its argument echoes the related lawsuits, claiming that the scheme is unconstitutional and amounts to "confiscation of constitutionally protected property."

Citing the company, Reuters reported, "The government is forcing Janssen to provide its innovative, patented medicines on pricing terms that by law must be significantly below market prices." 

The lawsuit further contends that the law breaches the U.S. Constitution's First Amendment guaranteeing free speech by obliging the company to make statements it believes are false and misleading, including the claim that prices set under the scheme are fair.

Other U.S. drug manufacturers, including Bristol Myers Squibb & Co BMY and Merck & Co Inc MRK, in addition to the U.S. Chamber of Commerce and industry lobby group the Pharmaceutical Research and Manufacturers of America, have likewise pursued legal action against the government regarding the scheme. 

The Chamber of Commerce has even requested an injunction to prevent its implementation.

In September, the U.S. Centers for Medicare and Medicaid Services (CMS) is expected to choose the initial ten drugs to be targeted for negotiations, with agreed prices scheduled for effect in 2026.

Price Action: JNJ shares are down 1.16% at $157.23 premarket on the last check Wednesday.