Novo Nordisk Challenges to CMS Single Source Drug Determinations Fall to IRA’s Bar Against Judicial Review

Yesterday, the U.S. Court of Appeals for the Third Circuit nixed the latest challenge filed by a major pharmaceutical company seeking to overturn the Medicare Drug Price Negotiation Program established by the Inflation Reduction Act (IRA). Building off prior cases, the Third Circuit quelched novel statutory challenges to the Centers for Medicare and Medicaid Services’ (CMS) definition of a single-source drug raised by Danish pharmaceutical developer Novo Nordisk based on the IRA’s bar against judicial review.

In CMS’ first round of drugs selected for IRA price negotiations, the agency included a series of six injectable insulin products sold by Novo Nordisk, including Fiasp- and NovoLog-branded treatments, as a negotiation-eligible drug having a single source. After Novo Nordisk sued the U.S. Department of Health & Human Services (HHS) in the District of New Jersey, the district court granted summary judgment to the government after finding that it lacked subject matter jurisdiction to review CMS’ designation and rejecting a series of constitutional claims lodged by Novo Nordisk.

Under IRA, ‘No Judicial Review’ of Negotiation-Eligible, Single Source Drug Determinations

On appeal to the Third Circuit, the appellate court noted that the presumption allowing judicial review of agency action can be overcome by a clear statement of Congressional intent to preclude such review. Reviewing the IRA, the Third Circuit found such a statement codified at 42 U.S.C. § 1320f-7(2), which provides that “[t]here shall be no judicial review of… the determination of negotiation eligible drugs… and the determination of qualifying single source drugs.”

Back in June 2023, CMS had issued revised guidance under the IRA’s Medicare negotiation program that indicated the agency would group together biological products having the same dosage forms and strengths, and the same holder of a Biologics License Application (BLA) even when those products are marketed under different BLAs. Here, the six Fiasp and NovoLog products selected by CMS each use insulin as part as the active ingredient, and Novo Nordisk holds the BLAs for each.

Novo Nordisk’s appeal was styled as a challenge to CMS’ decision to group multiple products as a single drug before the agency made determinations on Novo Nordisk’s own drugs. However, under Third Circuit precedent from Bakran v. Secretary, U.S. Department of Homeland Security (2018), the bar against judicial review stemming from a statute extends to the process by which the agency reaches that decision. Novo Nordisk had argued that, under the IRA, CMS was required to observe a 10-drug limit for the first round of Medicare negotiations, but the Third Circuit found that CMS’ treatment of six products as a single drug was ultimately precluded by the IRA’s bar against judicial review. The Third Circuit also found both that the judicial bar was not applied narrowly to certain negotiation-eligible and single source determinations under the IRA, and that the statutory bar precluded ultra vires review of the agency’s determinations.

No Nondelegation Doctrine Violation Because of Detailed Rules on Discretion, Like Price Ceilings

Judicial review of CMS’ decision to promulgate the 2023 guidance as legislative rulemaking without notice-and-comment procedures was not prohibited by the Administrative Procedures Act, the Third Circuit concluded in a footnote. However, following its reasoning from another recent decision upholding IRA’s Medicare negotiation program in Bristol Myers Squibb v. Secretary, U.S. Department of Health & Human Services (2025), the appellate court found CMS was expressly permitted under the IRA to promulgate legislative rules for the Medicare negotiation proguram by issuing guidance for the first three drug-pricing rounds, properly exempting the guidance from the notice-and-comment rulemaking requirements of the APA.

Like other appellants challenging the IRA’s drug price negotiation program before the Third Circuit, Novo Nordisk also lost a series of constitutional arguments against implementation of the program. Most significantly, the appellate court found that IRA did not violate the nondelegation doctrine, which prohibits Congress from handing legislative power to the Executive Branch. The Third Circuit noted that the IRA includes detailed rules guiding the agency’s discretion, including rules governing which are subject to price controls and rules on pricing controls, including price ceilings that the agency cannot exceed during negotiations. Therefore, Congress clearly supplied an intelligible principle guiding CMS’ use of delegated discretion.

Novo Nordisk contended that the IRA’s Medicare negotiation program compels speech in violation of the First Amendment, but the Third Circuit noted that Bristol Myers Squibb already found that the program regulated conduct with only an incidental effect on speech. Novo Nordisk’s constitutional due process claim under the Fifth Amendment was also extinguished by the Third Circuit’s ruling this May in AstraZeneca v. Secretary, U.S. Department of HHS, which found that AstraZeneca did not articulate a protected property interest in its its own drugs subject to the Medicare negotiation program.

This marks the third ruling since this May in which the Third Circuit has dismissed challenges to the IRA’s Medicare negotiation program, and it follows about two months after other pharmaceutical developers also failed in appeals to the Second Circuit and Sixth Circuit. Appellate courts continue to find that participation in Medicare and Medicaid is voluntary, therefore pharmaceutical firms are not compelled to take part in the drug price negotiations under the IRA, although drug companies have noted that such decisions to withdraw would have devastating impacts on access to medical treatments for patients on Medicare and Medicaid.

Patient advocacy group, Patients for Affordable Drugs (P4AD), celebrated the ruling, noting in a statement that this marks the 15th legal defeat for the industry on this issue.

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