On May 8, 2025, the Court of Appeals for the Third Circuit affirmed the district court’s dismissal of AstraZeneca’s challenges to the Inflation Reduction Act’s Drug Price Negotiation Program and CMS’s Guidance implementing the Program. AstraZeneca manufactures Farxiga, one of the drugs selected in the first round of drug price negotiations under the Program. Farxiga (dapagliflozin) is used to treat diabetes, heart disease, and kidney disease.
As we covered in a prior post, AstraZeneca challenged two aspects of CMS’s Guidance under the Administrative Procedure Act: (1) CMS’s approach to identifying “qualifying single source drugs,” whereby CMS considers “all dosage forms and strengths of the drug with the same active moiety” marketed by the same NDA holder (regardless of whether they are marketed under separate NDAs) for purposes of determining what drugs can be selected into the Program, and (2) CMS’s use of a “bona fide marketing” test to determine when a generic version of a selected drug is considered “marketed” under the statute. AstraZeneca also challenged the Program itself as a violation of the Fifth Amendment’s Due Process Clause. The U.S. District Court for the District of Delaware (Judge Connolly) dismissed the APA claims for lack of standing, and granted summary judgment against AstraZeneca on the due process claim.
Administrative Procedure Act (APA) Claims
AstraZeneca alleged two theories of injury caused by CMS’s Guidance: (1) that CMS’s approach to determining “qualifying single source drugs” adversely affects AstraZeneca’s “decision-making about research, development, and marketing” and (2) that CMS’s Guidance harmed AstraZeneca’s ability to value Farxiga in price negotiations with CMS. The Third Circuit held AstraZeneca’s alleged injuries were too speculative and failed to establish injury-in-fact because AstraZeneca alleged no “actual decision[s]” or “‘specific facts’ about how the Guidance shaped its behavior” that caused it concrete, particularized harm. Without evidence of actual or imminent injury, the court concluded AstraZeneca lacks Article III standing to pursue its APA violation claims.
Procedural Due Process Claim
AstraZeneca argued the Negotiation Program deprived the company of its protected patent property rights by limiting its ability to sell its drugs at market rates. The court rejected that argument, stating AstraZeneca owned no such property rights, as federal patent law does not create an affirmative right to sell anything, let alone at a particular price.
AstraZeneca also argued the Negotiation Program unlawfully imposes price controls on private market transactions while barring judicial review of those price controls. The court disagreed on the basis that the Negotiation Program “only sets prices for drugs that CMS pays for when it reimburses sponsors,” and these are therefore “not private market transactions.”
For more information and background on the various pending legal challenges to the Inflation Reduction Act, please visit our IRA Resource Page.
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