The D.C. Circuit Court recently issued a ruling in the case of Teva Pharmaceuticals USA, Inc. v. Robert F. Kennedy, Jr., which could significantly impact how Medicare negotiates drug prices. The court's decision affects pharmaceutical companies like Teva, which sells both branded and generic medications. The ruling clarifies the authority of the Centers for Medicare & Medicaid Services (CMS) in determining which drugs are eligible for price negotiations under the Inflation Reduction Act of 2022.
This case arose from Teva's challenge to CMS's rules regarding the classification of its drugs, specifically Austedo and Austedo XR. Teva argued that CMS improperly grouped these drugs as one qualifying single source drug, which has implications for their pricing under Medicare. The court's decision is important as it sets a precedent for how drug pricing negotiations will be conducted in the future.
Background
Teva Pharmaceuticals is a global pharmaceutical company that develops and sells both branded and generic medications. In this case, Teva was appealing a decision made by the U.S. District Court for the District of Columbia regarding the authority of CMS under the Inflation Reduction Act of 2022. The act allows CMS to negotiate prices for certain high-cost drugs covered by Medicare, which has historically not been allowed.
The dispute centers on how CMS determines which drugs are eligible for negotiation. Teva's Austedo and Austedo XR are used to treat involuntary muscle movements and were grouped by CMS as one qualifying single source drug due to their shared active ingredient and manufacturer. Teva contended that this grouping was an overreach of CMS's authority and that it violated their due process rights.
The Ruling
The D.C. Circuit Court ruled on August 18, 2026, and affirmed in part and reversed in part the district court's decision. The court found that the review bar in the Inflation Reduction Act applies to CMS's specific determinations regarding drug eligibility but does not prevent judicial review of the general legal standards governing those determinations. The court stated, "We conclude that the IRA permits CMS to treat Austedo and Austedo XR as one statutory drug, and the Negotiation Program does not deprive Teva of a protected property interest." However, it also noted that Teva's challenge to the “bona fide marketing” requirement was ripe for review.
The ruling was delivered by Circuit Judge Childs, with Judges Henderson and Pan also on the panel. The court's decision allows Teva to continue its challenge against the bona fide marketing requirement, which CMS uses to determine when a generic drug is considered marketed.
Impact
This ruling has significant implications for pharmaceutical companies and the healthcare industry at large. By affirming that CMS has the authority to group drugs for negotiation purposes, the court reinforced the government's ability to control drug pricing under Medicare. However, the court's decision to allow Teva's challenge regarding the bona fide marketing requirement opens the door for other pharmaceutical companies to question CMS's interpretations of the law.
The ruling may also influence how future negotiations between drug manufacturers and CMS are conducted. As the court clarified the boundaries of CMS's authority, it may lead to more scrutiny of how drugs are classified and how prices are negotiated. This could ultimately affect the availability and affordability of medications for Medicare beneficiaries.
What's Next
Teva may appeal the court's ruling regarding the grouping of its drugs, but the court's decision on the bona fide marketing requirement will now return to the district court for further consideration. The outcome of this case could set a precedent for how CMS implements the Drug Price Negotiation Program moving forward.