Johnson & Johnson, in Legal Battle Against the Inflation Reduction Act

Johnson & Johnson’s pharmaceutical division fights in court the Inflation Reduction Act, which should lower prescription drug prices, after some other big pharma companies also filed against it.

Janssen Pharmaceuticals filed suit in the U.S. District Court for New Jersey, after  Bristol Myers Squibb. Merck & Co. and the trade group Pharmaceutical Research and Manufacturers of America, who are also fighting the law, and filed their lawsuits in different federal venues.

Janssen has invested, since 2016, more than $65 billion in research and development

Big pharma companies are fighting together on this issue, although they are usually in a perpetual battle to reach the patients first. This spring, for instance, another patent contest was brewing between Big Pharma giants Amgen and Johnson & Johnson (J&J), after Amgen has tried producing a biosimilar of J&J’s top-selling psoriasis drug, Stelara, which has been in the U.S. market since September 2009. But, of course, when new laws are trying to cut their profit margin, even big pharma comes together. 

J&J says its constitutional rights are being violated by the Inflation Reduction Act. According to the complaint, for decades, federal law has supported a research and development ecosystem that has made the United States the world leader in pharmaceutical innovation. Under that system, drugs that achieve commercial success after extensive scientific development enable the creation of next-generation pioneering medicines that change the way we fight diseases. 

Janssen claims to have made this patient driven innovation the cornerstone of its business. The company said it invests tremendous resources in developing transformative medicines that address unmet medical needs and seeking cures to previously untreatable diseases such as cancers, autoimmune conditions, cardiovascular disease, HIV, and depression. 

In the case filed, Janssen says it has invested, since 2016, more than $65 billion in research and development, resulting in Food and Drug Administration (“FDA”) approvals for eight new medications and 52 expanded indications or new formulations for existing medications. 

The new law would force the company to “voluntarily” agree with the government 

Janssen said its First Amendment rights are being violated, since the new law would force the company to “voluntarily” agree with the government on a negotiated “fair” price, which in fact is not at all fair.  

The U.S. innovation ecosystem to which Janssen contributes has two vital components, both of which the company says are severely threatened by the Inflation Reduction Act. 

The first is the bargain at the heart of the patent and regulatory laws: when companies invest in and secure FDA approval for new treatments, they receive time-limited and constitutionally safeguarded protections, including the exclusive rights to make and sell the new treatment. 

The second is the operation of free-market forces to establish prices for medicines during and after their patent terms. Together, these components strongly encourage risk-taking and innovation to facilitate future breakthroughs. As a result of that system, patients have faster and broader access to pioneering treatments in the United States than in any other country. 

Janssen states that this self-sustaining cycle with a coercive scheme that, if fully implemented, will deal a fatal blow to both vital components of the innovation ecosystem. That scheme forces manufacturers to relinquish their patented drugs on terms dictated by the Government and retroactively rescinds the bargained-for patent and regulatory exclusivity protections that fuel innovation. 

Radical changes of the free market system will impede development of new treatments, J&J says

According to the Act, Janssen says manufacturers voluntarily “agree” to “negotiate” so-called “fair” prices for each drug selected for the Program. In reality, those labels are nothing more than rhetorically appealing falsehoods: there is no genuine agreement, no real negotiation, and nothing fair about the price the Government unilaterally dictates. 

The Act also supplants the free-market system with punitive price controls, granting a Government agency nearly unlimited authority to set drug prices at arbitrary amounts untethered to the value of those medications to patients. Those radical changes will impede development of new treatments and result in reduced drug availability and fewer treatment options in the U.S. healthcare market.

 Under the Act, a manufacturer may only escape from the Program’s mandates and penalties by withdrawing all of its products from Medicare and Medicaid—not just the drug selected for the Program. That provision implies, Janssen says, that the manufacturer should give up access to nearly 40% of the U.S. healthcare market. This would mean immediate reduction of revenues needed to fund research and development of new drugs, Janssen feels, which also impedes the manufacturer’s ability to innovate, compete, and operate in the future. 

This is not all, Janssen says. Forcing withdrawal of manufacturers from Medicare and Medicaid would cause millions of patients to lose insurance for and thus access to those manufacturers’ drugs they are relying on. 

Crippling penalties for manufacturers in Medicare and Medicaid who don’t submit to the Government’s terms

Manufacturers who remain in Medicare and Medicaid are subject to crippling penalties if they do not submit to the Government’s terms, Janssen says in the complaint. A tax of 186% to 1900% of a selected drug’s daily domestic revenues is applied until the manufacturer “agrees” to participate in the supposedly voluntary Program. 

This is not the first time, J&J fought price reduction techniques. Back in 2019, Johnson & Johnson (J&J) was raising prices at a time Congressional Democrats were proposing three new laws aimed at lowering the costs of prescription drugs. J&J raised prices on about two dozen drugs including the psoriasis treatment Stelara, prostate cancer drug Zytiga and blood thinner Xarelto. 

Astellas Pharma also recently challenged the law in federal court, announcing it had filed a suit against legislation that “is not only bad policy, but unconstitutional.” The Inflation Reduction Act (IRA) creates price-setting policies under the Centers for Medicare and Medicaid Services’ (CMS) Drug Price Negotiation Program (Program) that will disrupt the competitive marketplace for prescription drugs in the United States, Astellas Pharma said. Despite its claim to promote “negotiation,” the IRA imposes government-set pricing on prescription drugs available under Medicare that will discourage private-sector investment in the discovery and development of new medicines. As a result, the Program will disincentivize critical R&D efforts to tackle hard-to-treat diseases and diminish the availability of new medicines for patients.