Appeals court rules government lawfully included Novo insulin in negotiations.
A federal appeals court has sided with the U.S. government in a major case brought by Novo Nordisk, ruling that Medicare officials acted within the law when they included the company’s insulin in a government-driven drug price negotiation program. The decision came from the Third Circuit Court of Appeals on Monday, marking another loss for a large pharmaceutical company challenging how the Biden administration’s Inflation Reduction Act is being carried out. The court agreed that the Centers for Medicare and Medicaid Services, or CMS, correctly followed federal law when it grouped Novo Nordisk’s insulin products together for the new price-setting program.
This case is one of several filed by major drugmakers in recent years. Johnson & Johnson, Bristol Myers Squibb, and Novartis have all challenged the same negotiation program and lost. The appeals court cited those earlier rulings in its opinion, saying the law gives the federal government the authority to move forward with its plans to negotiate drug prices under Medicare.
Novo Nordisk had argued that CMS wrongly categorized six of its insulin products as a single “biologic” product. By doing so, the company said, the agency forced all six into the same pricing negotiations, limiting the company’s ability to manage its products separately. The company also claimed that the program violated several constitutional protections, including free speech and due process rights. Novo Nordisk said the law effectively forces manufacturers to agree with the government’s terms or face financial penalties.
The Inflation Reduction Act, signed into law in 2022, created the Medicare Drug Price Negotiation Program to help lower prescription drug costs for seniors. It gives the government the ability to negotiate directly with pharmaceutical companies over certain high-cost medications. Those negotiated prices are scheduled to take effect on January 1, 2026. The goal is to make vital drugs, including treatments for diabetes and cancer, more affordable for millions of Americans.
In its defense, the government said participation in the program is voluntary. Companies that do not wish to take part can remove their drugs from Medicare and Medicaid coverage altogether, though doing so would also mean losing access to those large markets.
The lower court had already ruled against Novo Nordisk in July 2024, stating that the company had options if it disagreed with the process. On Monday, the appeals court affirmed that view. Writing for the court, Judge Thomas Hardiman explained that the law provides a “30-day exit” for companies that prefer not to participate in the program, avoiding penalties such as excise taxes. He emphasized that the program does not compel participation and therefore does not violate the Constitution.
Two other judges, Peter Phipps and Arianna Freeman, joined in the ruling.
After the decision, Novo Nordisk released a statement saying it was “disappointed” and considering its next legal steps. The company said it remains strongly opposed to what it calls “government price setting” and continues to believe that the new law could disrupt how innovative medicines are developed and distributed in the United States.
The ruling means the government can continue preparing for the first round of negotiation to take effect as planned. It also signals that other similar lawsuits are unlikely to succeed, given the growing list of courts that have upheld the government’s position.
The broader political debate around the Inflation Reduction Act continues, as the pharmaceutical industry argues that the new rules could limit innovation by reducing profits that fund research and development. Supporters of the program say it is long overdue, pointing to the high cost of drugs that many older Americans rely on to survive.
For now, Novo Nordisk and other major drugmakers are left to decide whether to appeal to the U.S. Supreme Court. Unless higher courts intervene, the ruling clears the way for Medicare to begin its first-ever direct drug price negotiations—a major shift in how the nation’s largest health program pays for prescription medicine.
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