The U.S. Court of Appeals for the D.C. Circuit ruled on August 18, 2026, in the case of Servier Pharmaceuticals LLC v. Robert F. Kennedy, Jr., affecting how drug manufacturers qualify for discounts under Medicare. The decision impacts Servier Pharmaceuticals and its ability to phase in discount obligations for its drug Tibsovo, which is used in Medicare Part D. This ruling is significant as it clarifies the criteria for drug manufacturers under the Medicare Manufacturer Discount Program.
Servier Pharmaceuticals LLC, a drug manufacturer, acquired Tibsovo, a cancer treatment drug, from Agios Pharmaceuticals in April 2021. The dispute arose when Servier sought to qualify as a “specified small manufacturer” under the Medicare Manufacturer Discount Program, which allows certain manufacturers to phase in their discount obligations over time. The Centers for Medicare & Medicaid Services (CMS) designated Servier as a “specified manufacturer” but not as a “specified small manufacturer,” leading to Servier’s lawsuit against the Secretary of Health and Human Services and the Administrator for CMS.
The case reached the D.C. Circuit after the district court granted summary judgment in favor of the government. Servier argued that CMS should have credited it with sales of Tibsovo made by Agios in 2021, claiming that it should be considered the manufacturer of the drug for the purposes of the discount program. However, the court upheld the lower court’s ruling, stating that Servier did not produce any Tibsovo tablets sold under Medicare Part D in 2021.
The court's opinion, delivered by Circuit Judge Millett, confirmed that the criteria for qualifying as a specified small manufacturer are stringent. The ruling emphasized that to qualify, a manufacturer must have produced, prepared, or processed the drug sold under Medicare Part D in the relevant year. The court noted, “Servier has not shown that it undertook any of those activities with respect to any Part D sales of Tibsovo tablets in 2021.”
This ruling is important as it reinforces the interpretation of the Medicare Manufacturer Discount Program, which aims to provide discounts on certain drugs for Medicare beneficiaries. The court clarified that the program distinguishes between different types of manufacturers based on their production activities and sales data from 2021. The ruling underlines the legislative intent to support small and specialized manufacturers while ensuring that the program is not exploited by larger entities.
Going forward, the decision may have broader implications for how drug manufacturers approach their participation in Medicare programs. It highlights the need for manufacturers to have clear documentation of their production activities and sales to qualify for any exemptions or phased-in obligations under Medicare regulations. This ruling may also influence other manufacturers seeking similar designations, as it sets a precedent for how the courts interpret the statutory requirements of the program.
Servier Pharmaceuticals has the option to appeal the decision to the Supreme Court, but it remains to be seen whether they will pursue that route. There are currently no related cases pending that would directly impact this ruling.