The IRA includes provisions to lower prescription drug prices for people with Medicare by requiring manufacturers of certain drugs covered under Medicare Part D (starting in 2026) and Part B (starting in 2028) to negotiate prices with the government. That drug negotiation program would establish an upper limit for the maximum “fair” price for a given drug according to the government. That is, the program establishes price controls for certain prescription medications that will preclude manufacturers of those medications from receiving fair market value. And in June 2023, the Centers for Medicare and Medicaid Services—a component of the Department of Health and Human Services—issued guidance on the agency’s plans for implementing the program.
In this case, Bristol Meyers Squibb and Jassen Pharmaceuticals, Inc.—whose drugs are two of the 10 initial drugs subject to the drug negotiation program—challenged the constitutionality of the program in the District of New Jersey. The drug manufacturers allege that the program violates: (1) the First Amendment by compelling them to agree to a drug price the government states is “fair”; (2) the Fifth Amendment’s Takings Clause by not providing just compensation for their drugs; and (3) the unconstitutional conditions doctrine—a doctrine that limits the government’s ability to condition the receipt of a benefit on the waiver of a constitutional right. Unfortunately, the district court granted judgment for the government, concluding that the program neither affects a taking nor violates the unconstitutional conditions doctrine because participation in the program is voluntary and that the program regulates conduct, not speech. The drug manufacturers appealed the district court’s decision to the 3rd Circuit.
On July 19, 2024, the NAM filed an amicus brief in support of the appeal arguing that the program violates the Fifth Amendment’s Takings Clause and unconstitutional conditions doctrine by forcing manufacturers to transfer title in their drugs to third parties for less than fair market value. The “option” to exit the Medicaid and Medicare program is only hypothetical considering the government’s dominant share of the market for prescription drugs and devastating effects an exit would have on drug manufacturers. Further, forcing manufacturers of selected drugs to sell their products for less than fair market value will cause research and development of new drugs to stagnate, depriving patients of new therapeutic options.