Health Law Daily Wrap Up, MEDICARE PART D—D.C. Cir.: French drug maker Servier loses appeal over cancer drug pricing, (Aug 25, 2026)

By Brian Craig, J.D.

Servier did not actually produce any units of Tibsovo in 2021 to qualify as a “specified small manufacturer” under the Inflation Reduction Act of 2022.

The U.S. Court of Appeals for the District of Columbia has rejected an appeal of a CMS decision that required the drug manufacturer to offer its cancer-fighting drug Tibsovo (ivoosidenib) to Medicare Part D beneficiaries at discounted prices. In affirming the CMS decision and summary judgment by the federal district court in Washington, D.C., the federal appeals court concluded that the manufacturer did not qualify as a specified small manufacturer” under the Inflation Reduction Act of 2022. After acquiring another company in 2021, Servier did not actually produce any units of Tibsovo in 2021 to qualify as a specified small manufacturer (Servier Pharmaceuticals LLC v. Kennedy, No. 25-5054 (D.C. Cir. Aug. 18, 2026)).

Servier Pharmaceuticals LLC (Servier) is a pharmaceutical company based in France. Servier brought an action challenging the determination by CMS that Servier did not qualify as a “specified small manufacturer” for purposes of the Manufacturer Discount Program introduced in the Inflation Reduction Act of 2022. That program requires drug manufacturers to offer covered drugs to Medicare Part D beneficiaries at discounted prices beginning in 2025 but offers a phase-in approach for manufacturers that qualify as “specified small manufacturers.”

At issue in the case is Servier’s cancer-fighting drug Tibsovo (ivoosidenib). Before April 2021, Agios Pharmaceuticals (Agios) owned the approved New Drug Application (NDA) for Tibsovo, and Agios manufactured and sold the drug under its own FDA-approved labeler code. On April 1, 2021, Servier acquired the oncology business of Agios, including the existing stock of Tibsovo. Servier sold Tibsovo labeled with the Agios labeler code from April 1, 2021 to February 13, 2022. After CMS concluded that Servier did not qualify as a “specified small manufacturer,” Servier filed suit against CMS. The federal district court in the Washington, D.C. concluded that Servier did not qualify as a “specified small manufacturer” under the Inflation Reduction Act of 2022 (see French drug maker must offer cancer drug at discounted prices, Jan. 13, 2025). The manufacturer appealed.

Specified small manufacturer. The appeals court held that CMS properly determined Servier did not qualify as a specified small manufacturer. A manufacturer qualifies as a “specified small manufacturer” if 80% or more of its sales under Medicare Part D came from a single drug. The qualification depends on data drawn from the year 2021. Under the statute in 42 U.S.C. § 1395w-114c(g)(4)(C)(ii)(II), the total expenditures must come from the drug or portion of a drug that the business actually “produced, prepared, propagated, compounded, converted, or processed.” In this case, the panel concluded that Servier did not actually produce, prepare, propagate, compound, convert, or process any units of Tibsovo sold under Part D in 2021, as required by the statute. In April 2021, Servier Pharmaceuticals LLC acquired a drug called Tibsovo from Agios Pharmaceuticals, along with the stock of the drug that Agios had already manufactured. The appeals court rejected the argument from Servier that CMS should award a credit with the 2021 sales of the Tibsovo tablets that Agios made. Given that ruling, the panel concluded that it did not need to decide whether Servier satisfied the other statutory requirements to be a specified small manufacturer.

Arbitrary and capricious. In addition, the D.C. Circuit rejected the arbitrary and capricious challenges brought by the pharmaceutical manufacturer. Under the arbitrary and capricious standard, the agency must examine the relevant data and articulate a satisfactory explanation for its action. Servier insisted that its arbitrary-and-capricious challenge was not a purely legal challenge. But the appeals court found that Servier failed to identify any factual issue that CMS had in front of it and left unresolved. CMS did not treat like entities differently. The agency consistently attributed Tibsovo tablets created at Agios’s direction to Agios, and Tibsovo tablets created at Servier’s direction to Servier.

Therefore, the D.C. Circuit affirmed the district court’s grant of summary judgment in favor of CMS and ruling against the manufacturer.

The case is No. 25-5054.

Judge: Millett, P.

Attorneys: William Perdue (Arnold & Porter Kaye Scholer LLP) for Servier Pharmaceuticals LLC. Sean R. Janda, U.S. Department of Justice, for Robert F. Kennedy, Jr.

Companies: Servier Pharmaceuticals LLC

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