AstraZeneca v. HHS: Defining Standing and Due-Process Limits in the IRA’s Drug Price Negotiation Program

Introduction

In AstraZeneca Pharmaceuticals LP v. Secretary, United States Department of Health and Human Services (No. 24-1819, 3d Cir. May 8, 2025), the Third Circuit addressed two threshold issues arising under the Inflation Reduction Act of 2022 (“IRA”): (1) whether a drug manufacturer has Article III standing to challenge administrative guidance defining how the Centers for Medicare & Medicaid Services (“CMS”) will select and negotiate prices for certain high-expenditure drugs; and (2) whether the statutory Drug Price Negotiation Program itself violates procedural due process by depriving manufacturers of a property interest without adequate safeguards. AstraZeneca, the maker of the diabetes drug Farxiga, sued after CMS issued a “Guidance” interpreting the statute’s criteria for grouping related drug formulations and determining when a generic competitor “is marketed.” The district court dismissed AstraZeneca’s Administrative Procedure Act (“APA”) claims for lack of standing and granted judgment to the government on the due-process count. On appeal, the Third Circuit affirmed in all respects, clarifying the standards for industry challenges to CMS guidance and for asserting due-process rights in federal price-setting programs.

Summary of the Judgment

The Third Circuit unanimously affirmed the district court’s orders. It held:

• No Article III Standing for APA Claims: AstraZeneca failed to show a concrete, particularized injury traceable to the Guidance’s definitions (aggregating related drug formulations under a single “active moiety” and requiring “bona fide marketing” to treat a generic as marketed). The speculative business-planning concerns and uncertain negotiation positions alleged did not suffice to invoke judicial review under the APA.
• No Protected Property Interest: The Negotiation Program’s imposition of a “maximum fair price” on Medicare reimbursements does not infringe any constitutional property right. Pharmaceutical patents and exclusivities confer no affirmative right to sell at a chosen price, and no due-process entitlement arises from private-sector transactions with government reimbursement.
• Scope of Review: Without standing or a protectable property interest, AstraZeneca could not press its challenges. The court therefore affirmed dismissal of the APA claims and summary judgment on the due-process count.

Analysis

1. Precedents Cited

The court’s opinion draws on familiar Supreme Court and Third Circuit precedents governing both standing and due process:

• Standing Doctrines:
  • Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) – injury-in-fact must be concrete and particularized, not speculative.
  • TransUnion LLC v. Ramirez, 594 U.S. 413 (2021) – harms must be real, not “hypothetical.”
  • DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006) – standing must exist for each claim.
• Due Process and Property Interests:
  • Board of Regents v. Roth, 408 U.S. 564 (1972) – property interests arise from independent statutes or contract, not from vague expectations.
  • Biotechnology Industry Organization v. D.C., 496 F.3d 1362 (Fed. Cir. 2007) – patent grants no affirmative right to sell at a particular price.
  • Bowles v. Willingham, 321 U.S. 503 (1944) – upheld rent-control scheme that included judicial review of price decisions (distinguished here).

2. Legal Reasoning

The Third Circuit’s analysis unfolds in two parts: standing to challenge the Guidance and due-process rights in the Negotiation Program itself.

a. Standing Under the APA

To challenge a rule or guidance under the APA, a plaintiff must show:

1. An injury in fact that is concrete and particularized;
2. Traceable to the challenged agency action; and
3. Redressable by the court.

AstraZeneca rested on an affidavit by its market-access executive, asserting that the Guidance’s broad definition of a “qualifying single source drug” and the “bona fide marketing” test for generics would distort its R&D and negotiation strategies. The court found these allegations “conjectural or hypothetical” under TransUnion and Lujan. AstraZeneca offered no concrete examples of altered investment decisions or actual pricing offers harmed by the definitions. Without evidence of an actual or imminent injury, standing was absent.

b. Procedural Due Process

Procedural due process protections attach only to recognized property interests. AstraZeneca claimed that its patent and regulatory exclusivity periods created a “core property interest” in selling Farxiga at market rates. The court applied Roth and Biotechnology Industry Organization to conclude:

• Federal patent law does not grant an affirmative right to sell under Medicare at any particular price.
• The government’s reimbursement scheme for Parts B and D is not purely private commerce; price ceilings govern CMS payouts, not private purchasers’ decisions.
• No recognized property or liberty interest in avoiding the “maximum fair price” exists, so no due-process violation can be stated.

3. Impact

The decision has immediate and broader significance:

• Guidance Challenges: Drug manufacturers face a steep hurdle in obtaining judicial review of CMS “program guidance.” Absent a discrete, concrete injury from a specific guidance provision, manufacturers will struggle to invoke the APA.
• Price Negotiation Program: The Third Circuit’s ruling confirms that the IRA’s structured price-setting mechanism does not by itself trigger constitutional review unless a plaintiff identifies a statutorily protected interest in selling at higher reimbursement rates.
• Regulatory Certainty: CMS may proceed with the Guidance’s methods for aggregating active moieties and testing generic marketing – at least until another manufacturer demonstrates real-world harm from those definitions.
• Future Litigation: Manufacturers seeking to challenge CMS selections or offers will need to show a direct economic impact—for example, an actual offer below cost—rather than speculative concerns.

4. Complex Concepts Simplified

• Active Moiety: The core molecule responsible for a drug’s effect. CMS grouped all products sharing an active moiety (regardless of strength or formulation) when measuring total Medicare spending.
• New Drug Application (NDA): FDA approval to market a drug. A single active moiety can be approved under multiple NDAs for different uses.
• Negotiation Program Phases:
  1. Identification Phase: CMS ranks “qualifying single source drugs” by Medicare spending and selects ten drugs for 2026.
  2. Negotiation Phase: CMS and the manufacturer exchange offers, aiming for a “maximum fair price” capped at a percentage of private-market price.
• “Bona Fide Marketing” Test: CMS’s Guidance treats a generic as “marketed” only if it continues to have a meaningful market presence—intended to prevent token launches from nullifying negotiation eligibility.

Conclusion

AstraZeneca v. HHS reaffirms two core principles: (1) industry challengers must demonstrate a concrete, particularized harm to invoke judicial review of agency guidance under the APA; and (2) participation in a statutorily designed federal price-negotiation regime does not confer a constitutional property right to sell prescription drugs at unrestricted rates. In the developing landscape of Medicare drug pricing, the decision underscores CMS’s authority to implement the IRA’s Drug Price Negotiation Program by guidance, subject to notice and comment but not easily set aside in court absent a tangible injury or a legally protected interest. Manufacturers will need to adapt to the program’s structure or await further revisions in agency rulemaking—not broad judicial relief on procedural or constitutional grounds.