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. Over the first two negotiation cycles, the price talks have yielded nearly $20 billion in estimated annual savings. The IRA’s drug price negotiations are intended to lower Medicare spending as costs continue to rise; we forecast Medicare spending will reach $438 billion this year, up 7%.