Major business lobby fights Medicare price controls at Sixth Circuit

CINCINNATI (CN) — Several trade organizations, including the nation’s largest lobbying group, argued before an appeals panel Wednesday to limit the federal government’s ability to set prescription drug prices for Medicare participants.

The U.S. Chamber of Commerce and several local chambers must convince the Sixth Circuit they have associational standing to pursue claims against the Department of Health and Human Services, following the dismissal of their federal lawsuit in August 2024.

U.S. District Judge Michael Newman, a Donald Trump appointee, determined in his opinion the Dayton Area Chamber of Commerce, the Ohio Chamber of Commerce and the Michigan Chamber of Commerce failed to establish associational standing because the member businesses they supposedly represent are not based in their local areas.

All four plaintiffs, including the U.S. Chamber of Commerce, sued on behalf of Pharmacyclics and AbbVie — manufacturers of the prescription drug Imbruvica, used to treat certain types of blood cancers — but Newman pointed out the companies are based in California, Illinois, Massachusetts and Washington, D.C.

The lack of a geographical connection between the pharmaceutical companies and the three smaller trade groups was fatal to their claims, according to Newman.

Attorney Jeffrey Bucholtz of the Washington, D.C. firm King and Spalding argued Wednesday before the three-judge panel and focused on the second “prong” of associational standing: germaneness.

He said Newman erred in his dismissal opinion when he focused solely on whether the Dayton Chamber of Commerce sustained a concrete injury.

“There is nothing more natural than a chamber of commerce challenging price controls,” Bucholtz said. “If this price control program is upheld, it sets a dangerous precedent.”

U.S. Circuit Judge Andre Mathis asked the chambers’ attorney for a limiting principle that applies to germaneness.

“The limiting principle is to ensure adversarial vigor,” Bucholtz answered. “If there is a real mismatch between the subject matter of the lawsuit and the organization who files it, the standard is not met.”

“Based on that, it seems like you could challenge any nationwide law or policy,” the Joe Biden appointee replied.

Attorney Maxwell Baldi from the U.S. Department of Justice argued on behalf of the federal government, and took issue with the expansive scope of his counterpart’s position on germaneness.

“Adversarial vigor is not enough,” he told the panel. “By that theory, they could challenge any national economic policy. There must be a natural fit between the organization and the subject of the lawsuit.”

While the broad scope of the U.S. Chamber of Commerce gave it standing to sue on behalf of the makers of Imbruvica, Newman dismissed its claims in this case for failing to bring its suit in the proper venue.

“Pharmacyclics and AbbVie are large pharmaceutical companies that could have sued on their own in a federal court in a different state. Instead, plaintiffs have attempted to manipulate the system and manufacture standing to obtain a favorable venue. The court will not adopt a loose interpretation of the standing requirement for the purpose of forum shopping,” he concluded.

The chambers criticized Newman’s decision in their brief to the Sixth Circuit and accused him of establishing a new standard for associational standing.

“The district court effectively created a new legal rule that a chamber of commerce can represent its members’ interests only if those interests are uniquely localized within a region — for example, if the member is headquartered there,” they said.

Senior U.S. Circuit Judge Ronald Gilman seemed sympathetic to the government’s case when he questioned Bucholtz about the Dayton Chamber’s stated goal of improving the region.

“One could argue lower drug prices would improve the lives of the citizens of the Dayton area,” the Bill Clinton appointee said.

“That could be true, but it is the prerogative of the Dayton Chamber of Commerce to determine what is in the best interest of its members,” the attorney responded.

The government’s attorney emphasized the limits of associational standing in the closing moments of his arguments and reiterated the Dayton chamber’s local goals are “too far removed” from the impact of the national legislation.

“This is a relatively audacious effort to apply associational standing, and the chambers seek to impose a limitless standard that would open the floodgates to more litigation,” Baldi said.

He then echoed a point found in the government’s brief to the appeals court, and noted that such a lax standard would allow the pharmaceutical companies to join any number of regional chambers and file suit wherever they pleased.

“An amicus brief filed by 149 local and regional chambers of commerce illustrates the problem with plaintiffs’ approach: under that theory, Pharmacyclics could have joined any of those organizations, which could then sue on its behalf essentially anywhere in the country,” the brief said.

Bucholtz defended accusations of “forum shopping” found in Newman’s opinion as part of the normal legal process.

“Attorneys are supposed to seek a favorable venue on behalf of their clients within established principles of standing,” he told the court.

U.S. Circuit Judge Stephanie Davis, a Joe Biden appointee, rounded out the panel.

No timetable has been set for the court’s decision.

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