Novartis files suit against IRA after blockbuster Entresto makes CMS' price negotiations list

Add Novartis to the list of biopharma giants that have filed lawsuits against the U.S. government as a reaction to the Inflation Reduction Act (IRA). 

The company filed its case Friday in New Jersey federal court, three days after the Centers for Medicare & Medicaid Services (CMS) revealed that Novartis’ heart failure treatment Entresto was among 10 drugs subject to price negotiations in 2026.

The Swiss company joins Astellas, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Johnson & Johnson and Merck in filing separate suits against the IRA. All except for Astellas have at least one blockbuster drug set for the first round of price negotiations.

Industry association PhRMA and the U.S. Chamber of Commerce have also registered lawsuits against the IRA.

Most of the lawsuits contain the same language. Novartis labeled the negotiation process a “sham” and called the tax to be levied against companies that charge more than the negotiated price “draconian” and “wildly disproportionate to the punished conduct.”

“This case challenges an unprecedented and unconstitutional attempt to compel the nation’s drug manufacturers to sell their products at prices dramatically below their market value,” the Novartis lawsuit says.

The company charges that the Medicare negotiation setup is an “unconstitutional taking of private property,” which violates the Fifth Amendment. Novartis also argues the CMS action infringes rights established in the First Amendment and the Eighth Amendment.

As for Entresto—which was approved in 2015 for heart failure patients—Novartis said in the suit that more than 70% of its sales come through the CMS and estimates that at least a quarter of its market value will be lost through price negotiation. Novartis racked up $4.6 billion in sales of the angiotensin receptor/neprilysin inhibitor last year, a 37% increase from 2021.

Novartis added in its lawsuit that the IRA would “imperil” its ability to conduct the research to bring innovative drugs to the market.

“This program will stifle innovation and jeopardize the creation of future medicines—harming the millions of patients who count on the pharmaceutical industry to discover life-saving treatments,” Novartis said in a separate statement posted on its website. “The result would fundamentally jeopardize the development and supply of essential, life-saving drugs for the people who depend on them.”

Among the drugs the CMS has designated for negotiation are three from J&J: Stelara, Xarelto and Imbruvica, which the company shares with AbbVie.

Also included were Eliquis (Pfizer/BMS), Enbrel (Amgen), Farxiga (AZ), Januvia (Merck), Jardiance (BI/Eli Lilly) and Novolog (Novo Nordisk).

Legal analysts believe companies with drugs on the list will tweak their lawsuits to indicate more precisely the financial implications of CMS negotiations. They also expect companies to file injunctions and requests for summary judgements in September 2024, when the CMS announces proposed prices for the top 10 drugs.

The analysts also expect companies with drugs on the list that have not filed suit—including Novo, Amgen, Lilly and Pfizer—to do so or to join existing cases. There’s also a possibility that judges may try to consolidate the litigation, attorneys told Bloomberg Law.