Novo Nordisk, a major pharmaceutical company known for its diabetes and weight-loss drugs like NovoLog, Ozempic, and Wegovy, has been pushing back against a U.S. government program that allows Medicare to negotiate prices for certain high-cost prescription drugs. This program, part of the Inflation Reduction Act passed in 2022, aims to lower the cost of medications for millions of Americans, particularly seniors, by enabling Medicare to directly bargain with drugmakers for better prices. The first round of negotiations, which included some of Novo Nordisk’s insulin products, set new prices to take effect in 2026, while a second round targeting Ozempic and Wegovy is underway for 2027.
The company’s challenge stems from its belief that the negotiation process is unfair and oversteps legal boundaries. Novo Nordisk argues that the program forces them to accept lower prices under threat of hefty penalties, like steep taxes or losing access to Medicare and Medicaid markets, which they see as coercive rather than voluntary. They’ve raised concerns about the program violating constitutional protections, claiming it compels them to agree to prices that imply their drugs were overpriced before, which they argue infringes on free speech and due process. They also worry that lower prices could hurt their ability to fund research and development for new treatments.
On the other side, supporters of the program, including lawmakers and patient advocates, argue it’s a long-overdue step to make life-saving drugs more affordable. Medicare spends billions annually on medications like Novo Nordisk’s, with semaglutide-based drugs alone costing over $14 billion in a recent year. High drug prices can leave patients struggling to afford treatments, sometimes forcing tough choices between medicine and other essentials. The government contends that negotiating prices is a standard practice in other industries and countries, and the program is designed to balance affordability with innovation.
Novo Nordisk initially filed a lawsuit in 2023, challenging the program’s legality in a New Jersey federal court, but lost when a judge ruled participation was voluntary and didn’t violate their rights. They’ve since appealed to a higher court, arguing the program gives the government too much unchecked power. Meanwhile, they’ve reluctantly agreed to participate in both rounds of negotiations, likely to avoid penalties while their legal fight continues. The outcome of this challenge could shape how the U.S. tackles drug pricing, affecting patients, taxpayers, and the pharmaceutical industry for years to come.
Several other drugmakers have filed lawsuits challenging the Medicare drug price negotiation program under the Inflation Reduction Act, echoing concerns similar to Novo Nordisk’s about its legality and fairness. Companies like Merck, Bristol Myers Squibb, Johnson & Johnson, AstraZeneca, and Boehringer Ingelheim have all taken legal action, arguing the program violates constitutional protections, such as property rights and free speech, by forcing them to accept government-set prices under threat of penalties.
The pharmaceutical industry’s main trade group, PhRMA, along with organizations like the U.S. Chamber of Commerce, have also sued, claiming the program oversteps federal authority and could harm innovation. These cases, filed across various federal courts, have mostly been unsuccessful so far, with judges ruling that participation is voluntary since companies can opt out of Medicare entirely.
However, appeals are ongoing, and some companies hope conflicting rulings might push the issue to the Supreme Court. Despite the lawsuits, all affected drugmakers have participated in negotiations to avoid steep fines or losing access to Medicare’s massive market.