News: DOJ responds to pharma’s IRA tax complaint

Tuesday, December 19, 2023

DOJ responds to pharma’s IRA tax complaint

Dec 19, 2023

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By Lauren Gardner and David Lim

With Kelly Hooper

PROGRAMMING NOTE: We’ll be off next week for the holidays but back to our normal schedule on Tuesday, Jan. 2.

Driving the Day

A pharmacist scans a package of pills at checkout.

Medicare's new drug price program is being challenged in court by drugmakers and other pharma-related groups. | Andreas Rentz/Getty Images | Getty

DOJ TO CHAMBER: CALL THE TAXMAN — In its latest court filing, the Biden administration has responded to some of the legal arguments made by the pharmaceutical industry and its allies against Medicare drug price negotiation authority.

The DOJ’s motion to dismiss the U.S. Chamber of Commerce lawsuit “included the government's first substantive response” to the industry’s legal claims about the program’s excise tax scheme and whether Congress properly delegated power to regulators, Zach Baron, director of Georgetown Law’s Health Policy and the Law Initiative, said.

On the excise tax, which drugmakers say is excessively punitive, the Justice Department’s counter is simple: You’ve got the wrong guy.

The Chamber and its co-plaintiffs “have not sued the Department of the Treasury or the Internal Revenue Service (IRS) — the only agencies empowered to enforce the tax that Plaintiffs seek to enjoin and have declared unconstitutional,” the DOJ said in its motion. The Chamber and eight other lawsuits filed by drug companies and PhRMA challenge HHS and CMS — not the tax authorities.

Existing law also precludes lawsuits from preemptively challenging a tax, the DOJ said, with precedent allowing for parties to sue for refunds once taxes are paid.

On delegating authority: The DOJ also laid into the Chamber’s argument that the drug price program violates the Constitution’s nondelegation doctrine, a legal principle which holds that Congress cannot transfer its legislative authority to another government branch without offering an “intelligible principle” to guide regulators.

The Supreme Court is taking up a slew of cases lodged by conservative groups challenging the administrative state this term, and the justices’ decisions could foreshadow how they’ll eventually consider industry suits targeting the Inflation Reduction Act. The high court is widely expected to weigh in on the Medicare program in the coming years.

The Biden administration argued there’s ample precedent for the court to uphold lawmaker-directed delegations of power, and Congress clearly drew the lanes within which CMS could implement the negotiation program.

“There is nothing about the IRA that warrants a departure from that unbroken line of precedent — in fact, Congress provided far more guidance to the agency here than in the many statutes that have been upheld by the Supreme Court and the Sixth Circuit,” the DOJ said, referring to the Ohio-based venue where the Chamber lawsuit was filed.

What’s next: Briefing will continue in this case through the end of January.

IT’S TUESDAY. WELCOME BACK TO PRESCRIPTION PULSE. Your host is once again battling a day care plague at home. Stay safe out there, readers!

Send news and tips to Lauren Gardner (lgardner@politico.com or @Gardner_LM) or David Lim (dlim@politico.com or @davidalim).

TODAY ON OUR PULSE CHECK PODCAST, host Ben Leonard talks with POLITICO global health reporter Carmen Paun, who takes stock of the fentanyl epidemic and its devastating and fatal impact over the past year.

Listen to today’s Pulse Check podcast

Eye on the FDA

A sign for the Food And Drug Administration is pictured.

Expect more in-person industry meetings at the FDA's drug and biologic ceters. | Sarah Silbiger/Getty Images

FDA PLANS MORE LIVE MEETINGS — The FDA’s drug and biologic centers said Monday that the agency plans to expand its number of in-person meetings.

Beginning on Jan. 22, companies will be able to request that meetings on the Prescription Drug User Fee Act, the Biosimilar User Fee Act and the Over-The-Counter Monograph Drug User Fee Program be held in person.

“Existing meeting requests for the newly eligible meeting types received before January 22, 2024, or meetings already scheduled regardless of the scheduled meeting date, will not be converted to the in-person format, to permit fair implementation of the transition,” the FDA said.

Industry Intel

ILLUMINA MOVES TO DIVEST GRAIL — Genomic sequencing company Illumina said it aims to divest multicancer early detection test company Grail by the end of the second quarter of 2024 following a largely adverse ruling by the Fifth Circuit Court of Appeals.

The court, which for the first time in decades validated U.S. antitrust regulators’ concerns about vertical mergers, sent the case back to the Federal Trade Commission, ruling that the antitrust agency did not properly consider the company’s settlement offer.

But after reviewing the opinion, Illumina said it would not pursue further appeals.

“This is a major win for the FTC as it works to protect competition in health care,” Henry Liu, FTC Bureau of Competition director, said in a Monday press release. “Illumina’s decision to unwind its acquisition of Grail ensures the market for cancer detection tests remains competitive and delivers a choice of high-quality tests for patients and physicians, ultimately saving lives.”

Coronavirus

COVID WATCH — Covid-19 cases and hospitalizations are rising rapidly in the U.S. as health officials closely track JN.1, which the CDC has called the “fastest-growing variant” in the country, Kelly reports.

The spread of the variant, first detected in September, has sparked some concern among public health experts, who said the highly mutated and contagious strain might indicate the virus is getting better at infecting humans.

“It evades both infection-induced immunity as well as vaccine-induced immunity more than any other variant,” said Andrew Pekosz, an immunology professor at Johns Hopkins Bloomberg School of Public Health. “So we’ll probably see a lot of people who have had Covid infections four to six months ago perhaps get reinfected.”

But there likely won’t be a surge of cases similar to when Omicron first appeared, partly because the vaccine still offers protection against the variant, Pekosz said.

JN.1 produces symptoms similar to those of other variants and, so far, is not causing severe disease.

“It's producing an awful lot of ‘mild’ illness — with quotation marks around that because ‘mild’ in the public health context means you don't have to be hospitalized, but you still can be miserable for three or four days,” said Dr. William Schaffner, a professor of infectious diseases at Vanderbilt University Medical Center.

The quick spread of the new variant comes as the CDC has urged the public to get vaccinated against Covid, the flu and respiratory syncytial virus amid low uptake numbers. The agency has also warned emergency departments and hospitals of the strain they could see as the peak of the respiratory virus season nears.

Tobacco

FDA LAYS OUT 5-YEAR PLAN — On Monday, the FDA’s Center for Tobacco Products released a five-year strategic plan — but the document is a high-level overview that echoes goals already outlined by its director, Brian King.

The agency wants to ensure the evolving tobacco market is “comprehensively regulated” in a way that is clear and accessible to the public and industry, review tobacco product applications in an “efficient, transparent and consistent” way, ensure that illegal tobacco products are not on the market, communicate risks associated with tobacco products and attract a strong workforce.

Pharma Moves

Eli Lilly’s Christian Nguyen has been elected chair of the National Pharmaceutical Council’s board of directors for 2023 and 2024. Recently elected members of the board’s executive committee include Genentech’s Jan E. Hansen, Gilead Sciences’ Rekha Ramesh, Boehringer Ingelheim’s Christine Marsh and Spark Therapeutics’ Jeremy Allen.

Dr. W. Kimryn Rathmell is now director of the National Cancer Institute.

Document Drawer

The FDA issued draft guidance Monday outlining how its medical device center weighs whether real-world data is of sufficient quality to generate real-world evidence used in regulatory decision making.

The FDA launched Cosmetics Direct on Monday as its online portal for registering and listing cosmetic product facilities and products.

The FDA implemented a series of updates to labeling on opioid pain medicines, noting that the risk of overdoses rises as dosage increases, among other safety considerations.

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