Health Law Daily Wrap Up, DRUGS AND BIOLOGICS—D.D.C.: BOTOX as a biological product should have been excluded from price negotiations, (Nov 2, 2026)

By Jeffrey H. Brochin, J.D.

CMS misinterpreted the Inflation Reduction Act’s exclusion for plasma-derived products when it failed to exclude BOTOX from its published list of selected drugs for drug pricing negotiations.

A federal district court for the District of Columbia has granted in part the motion for summary judgment filed by AbbVie Inc. in a lawsuit brought by the drug manufacturer challenging CMS’s selection of BOTOX in its list of selected drugs for drug pricing negotiations. AbbVie contended that the agency failed to exclude BOTOX from negotiations as a “biological product derived from human whole blood or plasma.” The court agreed with AbbVie that because BOTOX contains HSA (a protein obtained from human blood plasma, and a necessary ingredient for BOTOX), it was undisputed that without HSA, one cannot make BOTOX (AbbVie Inc. v. HHS, No. 1:26-cv-00431 (CJN) (D.D.C. Oct. 29, 2026)).

Drug Price Negotiation Program. The Inflation Reduction Act of 2022 (IRA) created the Drug Price Negotiation Program which directed CMS to negotiate prices for certain drugs that have resulted in high expenditures to Medicare. The program sets out a two-phase process for each drug-pricing period, with the initial phase being a “narrowing process” in which CMS identifies the drugs subject to negotiation. But before a drug can be considered for negotiation, a drug must first satisfy the definition of the term “qualifying single source drug” (QSSD). This in turn consists of two categories of products: (1) “drug products” that are approved and marketed under new drug applications that have been approved for at least seven years; and (2) “biological products” that are licensed and marketed under biologics license applications that have been licensed for at least 11 years.

For the final step of the narrowing process, CMS publishes a list of “selected drugs”––the highest-ranked negotiation-eligible drugs that will be subject to the negotiation process for a drug-pricing period. The instant litigation arose from CMS’s placement of BOTOX on the selected drug list for the 2028 drug-pricing year, an action which AbbVie contended was contrary to the IRA’s blood plasma-derived exclusion.

Threshold matter of jurisdiction. Notably, Congress restricted judicial review at each step of the narrowing process. Specifically, the court stated, a court lacks subject matter jurisdiction over the “selection of drugs under section 1320f-1(b) of this title, the determination of negotiation-eligible drugs under section 1320f-1(d) of this title, and the determination of [QSSDs] under section 1320f-1(e) of this title.” Based on that restriction, CMS argued that the court lacked subject matter jurisdiction to consider the case. However, referencing the holding in Teva Pharms. USA, Inc. v. Kennedy, 187 F.4th 587 (D.C. Cir. 2026), the court rejected that view. In Teva, the allegedly erroneous interpretation concerned the definition of a QSSD, while here, it was an allegedly flawed view of the plasma-derived products exclusion. Pursuant to Teva, the court concluded that it had jurisdiction to review such interpretations because the statute permits a court to review “the generally applicable legal standards that govern” CMS’s determination.

Determining “biological product.” Moving on to the merits of the dispute, the court began by addressing AbbVie’s statutory claim that BOTOX is a “biological product that is derived from human whole blood or plasma” and therefore was to be excluded from the price-negotiation scheme. That language turned on two inquiries: whether (or why) BOTOX is a biological product within the meaning of the statutory exclusion; and if so, whether it is derived from human whole blood or plasma.

The FDA’s licensing framework referenced by the IRA defines a “biological product” to mean a “toxin…applicable to the prevention, treatment, or cure of a disease or condition of human beings.” Under that definition, since BOTOX’s active ingredient onabotA is a biological protein toxin, it was undisputed that BOTOX is a licensed biological product. However, although the parties agreed that BOTOX is a “biological product” within the meaning of the IRA’s exclusion, CMS disagreed that that’s because (or only because) BOTOX is a “biological product” under 42 U.S.C. § 262(i). The court interpreted the relationship between those positions to be that while the § 262(i) licensing definition may supply an initial, necessary element for being considered a “biological product that is derived from human whole blood or plasma” in the IRA, there is more to the term “biological product” in the IRA, which provides generally for the aggregation or bundling of products throughout the negotiation program.

Statutory subsection controlling. The court noted that the exclusion for blood plasma-derived biological products was located in the same statutory subsection as the term QSSD, and it excluded a subset of drugs from the overarching category of QSSDs. Given the conceptual similarity between drugs and biological products and their placement in the same subsection, it made sense to interpret the terms in an aligned fashion. In other words, because the IRA permits CMS to treat as a QSSD all drugs with the same active moiety and manufacturer—no matter the formulation—the IRA also allows CMS to treat as a biological product the bundle of products with the same active ingredient across all changes in strength, dosage form, or release mechanism owned by the same manufacturer; that is, a biological product is a single manufacturer’s bundle of biological products licensed and marketed under 42 U.S.C. § 262 that contain the same active ingredient across all dosage forms, strengths, and formulations.

Undefined phrase. Notwithstanding the foregoing conclusion as to BOTOX qualifying as a biological product, the question remained as to whether it is derived from human plasma. Interestingly, the IRA does not define that phrase, and therefore the court gave the language its ordinary meaning understood in context, “derive” is commonly understood to mean “to take, receive, or obtain especially from a specified source.” The question then became whether BOTOX is “made up of” or “obtained from” human plasma. The court found that common sense dictated that it is.

In sum, because one of BOTOX’s core components, HSA, is derived from human plasma, the court ruled that BOTOX as an aggregated biological product, is derived from human plasma and subject to exclusion under the IRA.

The case is No. 1:26-cv-00431 (CJN).

Judge: Nichols, C.

Attorneys: Eleanor Kathleen Ritter (Davis Polk & Wardwell LLP) for AbbVie Inc. Stephen M. Pezzi, U.S. Department of Justice, for U.S. Department of Health and Human Services.

Companies: AbbVie Inc.

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