The news: The Supreme Court rejected legal appeals from six pharma companies seeking to block Medicare’s drug price negotiation program. The program, part of the 2022 Inflation Reduction Act, requires negotiated discounts on high-expenditure drugs each year. The court denied the appeals without comment from AstraZeneca, Bristol Myers Squibb, Boehringer Ingelheim, Johnson & Johnson, Novo Nordisk, and Novartis.

Why it matters: The ruling solidifies the federal drug price negotiation program after years of legal challenges from drugmakers.

The pharma industry argues the policy amounts to government price setting and discourages investing in new medicines. Industry trade group PhRMA says investment in small-molecule drugs has fallen 70% since the program took effect. For context, small-molecule drugs face Medicare price negotiations after nine years compared with 13 years for more complex biologic drugs under the IRA.

However, the program is cutting into pharma revenues while delivering savings for Medicare and seniors. Lower negotiated prices for the first 10 brand-name drugs that took effect this year are expected to reduce Medicare spending by $6 billion and save seniors $1.5 billion in out-of-pocket costs, according to CMS. The latest round of 15 negotiated drug prices taking effect in 2027 will cut Medicare spending by another $12 billion, CMS reported in November. We forecast Medicare spending to reach $438 billion this year, up 7%.