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Column: A Trump judge slaps down Big Pharma's attack on Biden's drug price cuts
The pharmaceutical industry’s all-out attack on President Biden’s drug negotiation initiative for Medicare — comprising nine federal lawsuits (so far) and lots of heavy breathing by lobbyists — has just run into a major snag.
That it came from a judge appointed by Donald Trump is just one of its man-bites-dog aspects. Another is the forceful skepticism expressed by a federal judge in normally business-friendly Delaware in his ruling, issued March 1 against the British drugmaker AstraZeneca.
“Understandably, drug manufacturers like AstraZeneca don’t like the IRA,” wrote Judge Colm F. Connolly, referring to the Inflation Reduction Act of 2022, which authorized Medicare to negotiate with drugmakers over how much it would pay for prescription drugs taken by its enrollees.
No one is entitled to sell the Government drugs at prices the Government won’t agree to pay.
— Federal Judge Colm F. Connolly
“Lower prices mean lower profits,” Connolly continued. “Drug manufacturers like AstraZeneca desire the old pricing regime, and they lobbied and perhaps expected Congress not to pass the IRA in 2022.”
However, he wrote, “No one is entitled to sell the Government drugs at prices the Government won’t agree to pay.”
Connolly tossed out the lawsuit by granting the government summary judgment. His opinion has no sway over the federal judges hearing the other lawsuits, which have been brought by Merck, Johnson & Johnson, Novo Nordisk, Bristol Myers Squibb, Novartis, Boehringer Ingelheim, the industry lobbying arm Phrma and the U.S. Chamber of Commerce.
But his opinion can serve as a window into how the other judges might view those lawsuits, most of which bear such strong resemblance to AstraZeneca’s that they might all have been spit out by ChatGPT if it were asked to draft any industry lawsuit over any distasteful government regulation.
That makes it a useful counterbalance to the claims in those cases, which I earlier described as “windows into the mind of Big Pharma, revealing the industry’s grotesque level of entitlement and its cynical exploitation of Americans’ desire for better healthcare in order to claim profits well beyond the level that any thinking person would consider moral.” Those cases have been filed in federal courts in Ohio, New Jersey and the District of Columbia.
So let’s take a closer look. First, a word about the judge. He doesn’t appear to be cut from the same cloth as some Trump-appointed judges who have given the federal judiciary something of a bozoid flavor, such as James Ho of the 5th Circuit Court of Appeals in New Orleans or Matthew Kaczmarek of the Northern District of Texas, sitting in Amarillo, who have riled the legal system with extreme right-wing rulings.
A former U.S. attorney in Delaware under George W. Bush, Connolly is the chief judge of his district. His ruling in the AstraZeneca case comes as a meticulously researched analysis of the issues and the legal background. That doesn’t mean it will stand up as higher courts ponder AstraZeneca’s inevitable appeal.
A quick primer on the IRA’s Medicare negotiation initiative will be useful here. This implemented a long-cherished idea of drug price reformers, which is to give Medicare, the largest buyer of prescription drugs, the right to dicker over prices with drugmakers, overcoming a prohibition that Congress imposed on Medicare in 2003, when it created Medicare’s Part D prescription drug benefit.
The negotiation system also applies to drugs administered to patients under Medicare Part B, which typically are administered in hospitals or doctors’ offices, not at home. Medicaid can also benefit from price cuts reached through the Medicare process. Here’s how it works:
In September, the Department of Health and Human Services compiled a list of 10 branded, non-generic drugs from the roster of those on which Medicare spends the most; 30 more drugs will be added in 2025 and 2026, and more in subsequent years.
Drug companies have 30 days after the selection to agree to negotiations on a price, which must be at least a 25% to 60% discount from a drug’s average price on the non-federal market. For the first round, the negotiation process will last through July, with prices to take effect in 2026.
Companies that refuse to participate in this process or reject Medicare’s designation of a “fair” price will be subject to an excise tax starting at 65% of a drug’s U.S. sales and rising over time to 95%. To avoid the penalty, those companies have the option of pulling out of Medicare and Medicaid entirely.
AstraZeneca filed its lawsuit in August 2023. That was before HHS named the first 10 drugs to be negotiated, so the company couldn’t assume it would be directly affected by the program.
But it plainly had an inkling that its diabetes and kidney disease drug Farxiga would be on the list, because Medicare was spending about $3.3 billion a year to provide it to about 800,000 patients, so it mentioned the drug in its legal complaint, almost in passing. When Farxiga indeed was named as one of the first 10 drugs, the company amended its complaint with a three-word change to bring it up to date. About a week later, the company agreed to participate in the negotiation process, though it continued to pursue the lawsuit. I believe this is known in courthouse corridors as “hedging your bets.”
In its lawsuit, AstraZeneca asserts that the negotiation process hurts it in several ways — assertions aimed at showing that the company suffered concrete injuries from the IRA, the threshold established by the Constitution for allowing lawsuits to be heard in federal court — the principle known as “standing.”
The company claimed that the government’s plan to treat all permutations of a drug, including the conditions it can be used to treat, as a single drug will sap it of the incentive to search for new uses, “which in turn will narrow patient access to new treatments.” It also said that its “decision-making about other drugs” will be affected by the government’s negotiation rules, in part because how the negotiations will unfold is so uncertain “we don’t know the impact” of the process “on our ability to negotiate.”
Connolly found both claims to be too vague to give AstraZeneca standing. In any event, he wrote, AstraZeneca plainly does know how the negotiations will be conducted, since it described the process in detail in its 44-page legal complaint and 100 pages of briefs.
“The only uncertainty,” Connolly found, “comes from the filing of this lawsuit,” which calls for the IRA to be found unconstitutional. That won’t do, he observed. “A plaintiff,” he wrote, “cannot create standing to file a suit by filing the suit.”
The meat of AstraZeneca’s case is its contention that the negotiation provision of the IRA represents government coercion — that the threat of penalizing drugmakers with steep taxes for not coming to the negotiating table is tantamount to “a gun to the head.”
Connolly dismissed that out of hand by pointing to a flaw in the argument remarked on by other legal experts: For drug companies, selling their products to Medicare is an entirely voluntary choice. No law requires them to participate.
It’s true, as he noted, that by commanding 40% of the prescription drug market in the U.S. — nearly 50%, including Medicaid — Medicare is a customer crucial, perhaps even indispensable, to every drug company’s business model.
But here’s the trade-off: Reaching the 49 million Medicare and Medicaid members provides an incentive that the government is fully within its rights to use to extract better prices from the manufacturers. There’s “nothing sinister” about it, Connolly wrote.
He’s right, of course. It’s not as if drug companies themselves haven’t used their monopoly rights over blockbuster drugs to demand parasitic prices for those products. That’s the impulse, after all, that drove Gilead Sciences in 2015 to demand $100,000 per treatment for Harvoni, its miracle cure for hepatitis C, when it could have made a healthy profit at half that price, or less. AstraZeneca, by the way, reported an operating profit of $14.5 billion in its 2023 fiscal year on revenue of nearly $46 billion.
Aware that Connolly’s ruling might be used as a road map by the judges hearing the other drug industry lawsuits, HHS Secretary Xavier Becerra made sure that it was entered into the record in the other courts. One can expect the other plaintiffs to do what they can to distinguish their claims from AstraZeneca’s.
Merck, which was the first to sue to overturn the IRA, responded promptly. On Monday, it notified the judge in its case that it “does not assert a right to sell its drugs to Medicare at a market price; rather, it asserts a right not to be compelled to sell its drugs to Medicare at the government-dictated price.” (Emphasis Merck’s.)
To non-lawyers, this may seem to cut the baloney mighty thin. To lawyers, perhaps it cuts to the essence of the case. One way or another, it’s a signal that the pharmaceutical industry isn’t about to give up. Why would it, with billions of dollars at stake, never mind access to life-giving drugs for millions of Americans.
Dear Mr. Pelley:
I meant what I said in my letter last week to the 60 Minutes team: joining 60 Minutes is the honor of my career and I am grateful to be working alongside the people who have contributed to the most important television journalism brand this country has ever produced. While I’m new to 60 Minutes, I’ve devoted my career to investigative journalism and storytelling. I started this job excited to collaborate and to benefit from the wisdom and experience of the 60 Minutes veterans, with you among them. For that reason, one of the first things I did in my new role was call you to talk and invite you to dinner. It is a profound disappointment that you rejected that overture and chose ambush instead. Yesterday, you hijacked my first meeting with staff to disparage me, my qualifications, and my intentions with remarkable incivility and contempt. I welcome a diversity of viewpoints and respectful debate among the team, but this was nothing of the sort. Yesterday’s performative display of hostility enacted in front of the staff instead of in a civil, private conversation-demonstrated that you have no interest in contributing to the future success of the show, or approaching my new tenure with a mind open to collaboration and progress. I am here to deliver first-in-class news programming, not to make headlines about newsroom drama. I am eager to work alongside those who share this goal.
Despite yesterday’s misconduct, I had hoped that in sitting down with you today we could find a path forward together. You made clear that you are not interested in such a path.
Your antipathy to the future of the show has come through loud and clear. And I have heard you. I therefore write on behalf of CBS News, Inc. (“CBS”) to inform you that your employment with CBS is terminated for cause effective immediately. Enclosed is your formal termination letter.
Sincerely,
Nick Bilton
Executive Producer, 60 Minutes
The co-founder of Aspiration, Joseph Sanberg, was sentenced to 14 years in prison on Monday after defrauding investors and lenders of over $248 million.
The startup, an eco-friendly digital banking company boasting fossil fuel-free investments, carbon offsets for gas purchases, and a debit card with cash-back benefits for shopping at clean companies, was founded by Sanberg and Andrei Cherny. Cherny left the company in 2022 and has not been charged.
Sanberg, an Orange County native, pleaded guilty to wire fraud in October after being arrested in March last year. Aspiration subsequently filed for bankruptcy and liquidated all of its assets by July.
Sanberg and venture capitalist Ibrahim AlHusseini, who also faces charges, together forged a series of bank statements in order to obtain loans. From 2020 to 2021, the pair forged AlHusseini’s bank statements to show millions of dollars in assets in order to obtain millions of dollars from lenders.
Additionally, they forged a letter from their audit committee stating that $250 million in funds were available, when in reality Aspiration had less than $1 million. The amount of loans defrauded exceeded $248 million.
In 2021, Sanberg artificially inflated Aspiration’s 2021 revenue by $44 million by recruiting 27 fake customers to sign letters of intent pledging tens of thousands of dollars per month for tree planting services. Sanberg himself funded the contracts and used the inflated revenue numbers to obtain more loans.
The charges sparked an NBA investigation into salary cap allegations due to Aspiration’s connections with Clippers owner Steve Ballmer.
Ballmer personally invested $60 million in Aspiration, all of which was lost. He is now the target of a civil lawsuit alleging his participation in the scheme. Ballmer denies the allegations.
The team announced a $300-million sponsorship deal with Aspiration, and Clippers player Kawhi Leonard signed a four-year, $28-million marketing contract with the company, which reportedly performed no duties. The issue has raised concerns about how players are circumventing the NBA’s salary cap.
The team lost the $300-million sponsorship deal and an additional $20 million paid for carbon offset purchases.
Residents in the city of Monterey Park will be the first in the nation to vote on a permanent ban on data centers Tuesday.
If approved, Measure NDC would prohibit data centers within the city limits and could only be overturned by another vote.
Yard signs saying “No Data Center” in English and Chinese with images of dragons line sidewalks in the San Gabriel Valley city.
As a wave of data center opposition sweeps the country, numerous towns and counties across the U.S. have instituted temporary moratoria and other restrictions on the facilities. But only a handful have instituted indefinite bans, and just four other towns have sent related matters to the ballot.
Supporters are hoping the vote will set a precedent for the rest of the region, where residents are fighting proposals in Vernon and City of Industry.
“This is about as permanent a ban as we can get,” said Steven Kung, co-founder of the group No Data Center Monterey Park. “Winning Measure NDC would send a huge message to the rest of the San Gabriel Valley about how residents don’t want data centers.”
The ballot measure emerged from the fight against a 247,000-square-foot center proposed in 2024 by the Australian-owned investment firm HMC StratCap for a residential area in Monterey Park.
The facility would have sat less than 500 feet away from the nearest home and used three times the electricity of the 60,000-person, predominantly Asian American city.
While the developer touted the potential for jobs and tax revenue, residents expressed concerns about noise and air pollution, rising electricity rates and a potential to lower property values.
The company pulled its plans in late March following public outcry and a March 4 city council vote to extend a temporary data center moratorium and place a ban on Tuesday’s ballot.
In a letter to the city council, HMC StratCap said it would pursue a different use for the land and would not engage in a ballot measure fight.
The city council later banned data centers indefinitely, the first in California to do so, said Mayor Elizabeth Yang. But she’s still been out campaigning for the measure with all four other council members.
“If a council puts in an ordinance, a future council can reverse it too,” said Yang. “With the ballot measure, unbanning it is a lot harder because you need the entire city to vote on it.”
The measure proposes the ban “to protect air quality, drinking water resources, and public health” and “prevent impacts to electricity and water rates.”
While California places third in the country for existing data centers with about 300 facilities, it hasn’t been a hot spot in the recent AI-driven data center boom. High electricity rates, expensive land and regulatory hurdles mean that fewer, and smaller, facilities are currently planned than in Virginia, Texas, Georgia, Illinois or Arizona.
“Most of California’s data centers are small by today’s standards,” said Shaolei Ren, an engineering professor at UC Riverside who studies how to reduce the environmental impacts of data centers. “Ten years ago, they would be medium-sized, but the power demand for new AI data centers has increased a lot.”
The average operating data center demands 45 megawatts, according to the Washington Post, while the average planned one would draw 430 MW. The one proposed for Monterey Park would have required about 50 MW at peak demand.
As proposals crop up in SoCal, they’re met with fierce opposition. Montebello, El Monte and Baldwin Park have all enacted temporary moratoria, and Alhambra recently banned data centers as part of a zoning code update. City of Industry, Vernon, City of Commerce and Santa Fe Springs are moving in the other direction, trying to court developers and streamline data center approvals. Community groups are fighting that.
Outside the San Gabriel Valley, residents of Coachella and Imperial County are showing up in droves to protest local proposals.
Matthew Shaw, a volunteer with the Coalition for Responsible Data Center Development, who recently published a report on opposition to AI data centers, said a vote to ban them in Monterey Park “would lead to copycats, partially because so many groups are just opposed to any data center development at all.”
While there is no formal opposition to Measure NDC, some building trades like Ironworker Local 433 supported the Monterey Park data center when it was still live before city council. Those in the data center industry are lamenting the state of public opinion.
“These are multi-billion-dollar assets that are built by multi-trillion-dollar companies. These things will get done,” said Mehdi Paryavi, chairman of the International Data Center Authority. “My biggest problem is that our industry does not invest enough in community engagement.”
Paryavi said towns that seek to limit data centers are missing out on thousands of jobs generated by data center construction, operations and customers, as well as faster artificial intelligence speeds and better performance.
Kung said local community organizers are “looking at the empirical evidence” and seeing a ban as a win.
“We’ve never seen a city that embraces a data center and is like, ‘Look how our quality of life has increased, look how all the revenue has gone into citywide improvements,’” he said. “That just doesn’t exist.”
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