Constitutional Challenges to the Medicare Drug Price Negotiation Program
Congressional research reportOct 10, 2024
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Constitutional Challenges to the Medicare
Drug Price Negotiation Program
Updated October 10, 2024
Congressional Research Service
https://crsreports.congress.gov
R47682
SUMMARY
Constitutional Challenges to the Medicare
Drug Price Negotiation Program
R47682
October 10, 2024
Hannah-Alise Rogers
Legislative Attorney
Congress created the Medicare Drug Price Negotiation Program (the program) through the
budget reconciliation measure known as the Inflation Reduction Act (IRA; P.L. 117-169), which
became law on August 16, 2022. The program allows Medicare to negotiate the prices of certain
Medicare drugs directly with drug manufacturers for the first time. The Centers for Medicare and
Medicaid Services (CMS), the division of the U.S. Department of Health and Human Services
(HHS) tasked with administering the program, has issued guidance to explain the program’s initial implementation. On
August 29, 2023, CMS selected the first 10 Medicare Part D drugs that will be subject to negotiated prices in 2026. The
agency announced the negotiated prices for those drugs on August 14, 2024.
In summer 2023, several drug manufacturers and trade associations representing manufacturers challenged the law before
federal district courts across the country. The plaintiffs made various arguments in different lawsuits, including that the law is
unconstitutional under the First, Fifth, and Eighth Amendments. They also alleged violations of the Nondelegation Doctrine,
the Spending Clause, and the Administrative Procedure Act.
The plaintiffs argued that the IRA violates the First Amendment because it forces manufacturers to sign a pricing agreement
with the Secretary of HHS that characterizes the negotiated price of the drug as “fair,” which amounts to compelled speech.
The plaintiffs also argued that the IRA violates the Fifth Amendment, both the Due Process Clause and the Takings Clause.
First, the plaintiffs claimed that the IRA violates the Due Process Clause because it lacks the requisite procedural safeguards,
including notice, the opportunity to be heard, and the potential for judicial review. Second, the plaintiffs alleged that the law
constitutes a taking of both tangible property (drugs) and intangible property (patents). Some of the plaintiffs claimed that the
program amounts to a per se taking, while others argue that it constitutes a regulatory taking.
A few of the plaintiffs argued that the IRA violates the Eighth Amendment Excessive Fines Clause because the excise tax to
which manufacturers of selected drugs that do not comply with the statute will be subjected is really a punishment disguised
as a tax. The trade association plaintiffs argued that the IRA violates the Nondelegation Doctrine by ceding too much power
to the Secretary of HHS to set drug prices. Finally, several plaintiffs argued that the IRA cannot be justified on the basis of
Congress’s Spending Clause power because the IRA does not condition the receipt of federal funding on a manufacturer’s
participation in the program. The plaintiffs further alleged that even if the IRA could be said to impose such a condition, the
statute does not provide adequate notice of the condition, the condition is not related to the purpose of the spending and is
unconstitutionally coercive, and compliance with the condition would violate manufacturers’ other rights under the
Constitution.
Of the 10 cases initially filed, one was voluntarily dismissed, two remain pending in federal district court, and seven have
been decided at the federal district court level. Some of the decisions issued so far were appealed and, to date, one appeal has
been decided; the appellate court remanded the case to the district court. Thus, there are three cases pending in federal district
courts at the time of this writing. Of the district court cases decided so far, two did not reach the merits of the constitutional
claims because they were dismissed for procedural reasons. As discussed in this report, the other decisions reached the merits
of some of the plaintiffs’ constitutional challenges, but none of the plaintiffs’ constitutional claims have been successful to
date. Six of the decisions issued were appealed to the U.S. Courts of Appeals for the Second, Third, Fifth, and Sixth Circuits,
and the cases before the Second, Third, and Sixth Circuits remain pending. Thus far, attempts to enjoin CMS’s
implementation of the program have been unsuccessful. Some stakeholders predict that the litigation could eventually reach
the U.S. Supreme Court.
This report explains and contextualizes the plaintiffs’ constitutional claims by analyzing relevant U.S. Supreme Court
jurisprudence, and it discusses the federal district courts’ resolution of the claims thus far. The Administrative Procedure Act
claims are outside the scope of this report but are discussed in other CRS products. The report concludes by identifying
relevant considerations for the 118th Congress as the litigation proceeds.
Congressional Research Service
Constitutional Challenges to the Medicare Drug Price Negotiation Program
Contents
First Amendment Claim .................................................................................................................. 4
Fifth Amendment Claims ................................................................................................................ 8
Due Process Clause Claim ........................................................................................................ 8
Takings Clause Claim............................................................................................................... 11
Eighth Amendment Claim ............................................................................................................. 14
The Nondelegation Doctrine Claim............................................................................................... 17
Spending Clause and Related Claims ............................................................................................ 20
Concluding Considerations ........................................................................................................... 23
Tables
Table 1. Medicare Drug Price Negotiation Program Challenges .................................................... 3
Contacts
Author Information........................................................................................................................ 26
Congressional Research Service
Constitutional Challenges to the Medicare Drug Price Negotiation Program
C
ongress created the Medicare Drug Price Negotiation Program (the program) in a budget
reconciliation measure known as the Inflation Reduction Act (IRA), which became law on
August 16, 2022.1 Beginning in June 2023, several pharmaceutical manufacturers and trade
associations filed lawsuits in various federal district courts alleging that the program was
unconstitutional and violated the Administrative Procedure Act (APA).2 These cases, brought
against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare
and Medicaid Services (CMS), were filed in D.C. District Court, the U.S. District Court for the
Southern District of Ohio, the New Jersey District Court, the U.S. District Court for the Western
District of Texas, the U.S. District Court for the Northern District of Illinois, the U.S. District
Court for the District of Connecticut, and the U.S. District Court for the District of Delaware.3
Taken together, the cases brought a variety of facial constitutional challenges against the IRA,
including under the First, Fifth, and Eighth Amendments; the Nondelegation Doctrine; and the
Spending Clause.4 Additionally, at least two of the plaintiffs also argued that the CMS Guidance
implementing the program violates the APA.5
The IRA authorizes the Secretary of HHS, via CMS, to negotiate the prices of certain qualifying,
single-source drugs directly with manufacturers for the first time.6 The program will apply to
certain single-source prescription drugs and biological products covered by Medicare Part B
(physician-administered drugs) and Medicare Part D (retail prescription drugs).7 The IRA
instructs CMS to implement the first three years of the program (price years 2026–2028) through
“program instruction or other forms of program guidance.”8 As described in previous CRS
1 Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat 1818. The IRA is codified in multiple titles of the U.S.
Code. The relevant sections of the Medicare Drug Price Negotiation Program are found at 42 U.S.C. §§ 1320f-1–
1320f-7.
2 Administrative Procedure Act, 609 Stat. 237 (1946) (codified at 5 U.S.C. §§ 551–559).
3 Complaint, Merck & Co. v. Becerra (Merck Compl.), No. 23-1616 (D.D.C. June 6, 2023), ECF No. 1. Complaint,
U.S. Chamber of Com. et al. v. Becerra (Chamber of Com. Compl.), No. 23-0156 (S.D. Ohio June 9, 2023), ECF No.
1; Complaint, Bristol Myers Squibb Company v. Becerra (Bristol Myers Compl.), No. 23-3335 (D.N.J. June 16, 2023),
ECF No. 1; Complaint, Nat’l Infusion Center et al. v. Becerra (PhRMA Compl.), No. 23-0707 (W.D. Tex. June 21,
2023), ECF No. 1; Complaint, Janssen Pharms. v. Becerra (Janssen Compl.), No 23-3818 (D.N.J. July 18, 2023), ECF
No. 1; Complaint, Astellas Pharms. v. Becerra (Astellas Compl.), No. 23-4578 (N.D. Ill. July 14, 2023), ECF No. 1;
Complaint, Boehringer Ingelheim Pharms. v. Becerra (Boehringer Compl.), No. 23-01103 (D. Conn. Aug. 18, 2023),
ECF No. 1; Complaint, AstraZeneca Pharms. v. Becerra (AstraZeneca Compl.), No. 23-0931 (D. Del. Aug. 25, 2023),
ECF No. 1.
4 Complaints, supra note 3.
5 AstraZeneca Compl. at 7; Boehringer Compl. at 8. This report addresses only the plaintiffs’ constitutional challenges.
For more information about the APA challenges, see CRS Legal Sidebar LSB11112, Administrative Procedure Act
Challenges to CMS’s Implementation of the Medicare Drug Price Negotiation Program, by Hannah-Alise Rogers
(2024).
6 Inflation Reduction Act of 2022, Pub. L. No. 117-169, §§ 11001-02, 136 Stat. 1818 (codified at 42 U.S.C. §§ 1320f-1
–1320f-7).
7 The statute’s definition of “qualifying single source drug” distinguishes between drug products and biological
products. 42 U.S.C. § 1320f-1(e)(1)(A)–(B). For a drug product to be a qualifying single-source drug, (1) the drug must
be a covered Part B or Part D drug, be approved by the U.S. Food and Drug Administration (FDA), and be marketed
pursuant to such approval; (2) at least seven years must have passed since the initial approval; and (3) the drug cannot
be the listed drug for any approved and marketed generic drug. Id. § 1320f-1(e)(1)(A)(i)-(iii). For a biological product
to be a qualifying single-source drug, the statute requires the covered Part B or Part D biological product (1) to be
licensed under Section 351 of the Public Health Service Act (42 U.S.C. §§ 201–239l-3) and be marketed under the
license; (2) to have been marketed for at least 11 years from the date of initial licensure; and (3) to not be the reference
product for any other licensed and marketed biosimilar. Id. § 1320f-1(e)(1)(B)(i)-(iii).
8 The statute directs CMS to carry out the first three years of the program (price years 2026–2028) “by program
instruction or other forms of program guidance.” 42 U.S.C. § 1320f note. In its Revised Guidance, CMS states that it
“will develop its policies for 2029 and all subsequent initial price applicability years of the Negotiation Program
(continued...)
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reports, CMS began implementing the Medicare Drug Price Negotiation Program by issuing
Initial Guidance for price applicability year 2026 on March 15, 2023.9 CMS subsequently issued
Revised Guidance on June 30, 2023, to address stakeholder concerns regarding the selection of
negotiation-eligible drugs and the factors to be considered when evaluating maximum fair prices
(MFPs).10 In accordance with the statute, on August 29, 2023, CMS selected the first 10 drugs for
price negotiation.11 On May 4, 2024, CMS issued more guidance for price applicability year
2027.12
On August 14, 2024, CMS announced the negotiated prices for the first 10 selected drugs, which
represented between a 38% and 79% discount from the drugs’ list prices.13 The MFPs are
scheduled to take effect on January 1, 2026.14 As discussed in the CMS Guidance for price
applicability year 2027, CMS will select 15 more drugs for negotiation on February 1, 2025, and
those prices will take effect on January 1, 2027.15
through notice-and-comment rulemaking.” CMS, MEDICARE DRUG PRICE NEGOTIATION PROGRAM: REVISED GUIDANCE,
IMPLEMENTATION OF SECTIONS 1191–1198 OF THE SOCIAL SECURITY ACT FOR INITIAL PRICE APPLICABILITY YEAR 2026,
at 2 (June 30, 2023), https://www.cms.gov/files/document/revised-medicare-drug-price-negotiation-program-guidancejune-2023.pdf [hereinafter CMS REVISED GUIDANCE].
9 CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS), MEDICARE DRUG PRICE NEGOTIATION PROGRAM: INITIAL
MEMORANDUM, IMPLEMENTATION OF SECTIONS 1191–1198 OF THE SOCIAL SECURITY ACT FOR INITIAL PRICE
APPLICABILITY YEAR 2026, AND SOLICITATION OF COMMENTS (Mar. 15, 2023),
https://www.cms.gov/files/document/medicare-drug-price-negotiation-program-initial-guidance.pdf.
For a description of the Medicare Drug Price Negotiation Program, the CMS Guidance, and the statute’s limitations on
judicial review, see CRS Report R47555, Implementation of the Medicare Drug Price Negotiation Program: Centers
for Medicare and Medicaid Guidance and Legal Considerations, by Hannah-Alise Rogers (2023). For a complete
summary of the IRA’s changes to Medicare, Medicaid, and private insurance, see CRS Report R47396, Health Care
Provisions of the Budget Reconciliation Measure P.L. 117-169, coordinated by Katherine M. Kehres (2022). For a brief
overview of the IRA’s changes to the Medicare Program, including an overview of the program and other changes to
Medicare Parts B and D, see CRS In Focus IF12203, Selected Health Provisions of the Inflation Reduction Act, by
Suzanne M. Kirchhoff (2022) (for follow up, congressional offices may contact Laura Wreschnig at CRS).
10 CMS REVISED GUIDANCE, supra note 8.
11 U.S. DEPT. OF HEALTH & HUMAN SERVS., HHS Selects the First Drugs for Medicare Drug Price Negotiation, Press
Release (Aug. 29, 2023), https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drugprice-negotiation.html.
12 CMS, MEDICARE DRUG PRICE NEGOTIATION PROGRAM: DRAFT GUIDANCE, IMPLEMENTATION OF SECTIONS 1192–98 OF
THE SOCIAL SECURITY ACT FOR INITIAL PRICE APPLICABILITY YEAR 2027 AND MANUFACTURER EFFECTUATION OF THE
MAXIMUM FAIR PRICE (MFP) IN 2026 AND 2027, at 10 (May 3, 2024), https://www.cms.gov/files/document/medicaredrug-price-negotiation-draft-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf [hereinafter CMS
2027 GUIDANCE].
13 CMS, Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026 (Aug.
14, 2024), https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-pricesinitial-price-applicability-year-2026.
14 CMS REVISED GUIDANCE, supra note 8, at 117; 42 U.S.C. § 1320f(d)(1).
15 CMS 2027 GUIDANCE, supra note 12, at 6.
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Table 1. Medicare Drug Price Negotiation Program Challenges
Case Name
District Court
Case Number
District Court
Decision
Appeal
Merck & Co., Inc. v.
Becerra
District of Columbia
1:23-CV-01615
Not yet issued
N/A
Dayton Area
Chamber of
Commerce v. Becerra
Southern District of
Ohio
3:23-CV-00156
2024 WL 3741510
(Aug. 8, 2024)a
Sixth Circuit
Bristol Myers Squibb
Co. v. Becerra
New Jersey
3:23-CV-03335
2024 WL 1855054
(Apr. 29, 2024)b
Third Circuit
Janssen Pharms., Inc.
v. Becerra
New Jersey
3:23-CV-03818
2024 WL 1855054
(Apr. 29, 2024)c
Third Circuit
National Infusion
Center Assoc. et al. v.
Becerra
Western District of
Texas
1:23-CV-00707
2024 WL 561860
(Feb. 12, 2024)d
Fifth Circuit
2024 WL 4247856
(Sept. 20, 2024)
(remanded back to
district court)
Boehringer Ingelheim
Pharms., Inc. v.
Becerra
Connecticut
3:23-CV-01103
2024 WL 3292657
(July 3, 2024)e
Second Circuit
AstraZeneca Pharms.
LP v. Becerra
Delaware
1:23-CV-00931
2024 WL 895036
(Mar. 1, 2024)f
Third Circuit
Novartis Pharms.
Corp. v. Becerra
New Jersey
3:23-CV-14221
Not yet issued
N/A
Novo Nordisk, Inc. v.
Becerra
New Jersey
3:23-CV-20814
2024 WL 3594413
(July 31, 2024)g
Third Circuit
Astellas Pharms. v.
Becerra
Northern District
of Illinois
1:23-CV-04578
Voluntarily
dismissed
N/A
Notes:
a. https://scholar.google.com/scholar_case?case=14957151993020792367.
b. https://scholar.google.com/scholar_case?case=13600377549457583072.
c. https://scholar.google.com/scholar_case?case=13600377549457583072.
d. https://litigationtracker.law.georgetown.edu/wp-content/uploads/2023/06/PhRMA_2024.02.12_ORDERGRANTING-DEFENDANTS-MOTION-TO-DISMISS.pdf.
e. https://scholar.google.com/scholar_case?case=1092710628804502367.
f.
https://scholar.google.com/scholar_case?case=16050526634522480155.
g. https://scholar.google.com/scholar_case?case=6163817055414354501.
As outlined in Table 1, the 10 originally filed cases are now at different stages of litigation. One
case (Astellas Pharmaceuticals v. Becerra) was voluntarily dismissed after the manufacturer’s
drug was not selected for price negotiation for price year 2026.16 Two other cases (Merck &
Company v. Becerra and Novartis Pharmaceuticals Corporation v. Becerra) have not yet been
decided by district courts.17 Seven other cases were decided at the district court level.18 The
16 Notice of Voluntary Dismissal, Astellas Pharms. v. Becerra, No. 23-4578 (N.D. Ill. Sept. 6, 2023), ECF No. 23.
17 Merck & Co., Inc. v. Becerra, No. 23-1616 (D.D.C.); Novartis Pharms. Corp. v. Becerra, No. 23-4221 (D.N.J.).
18 See Dayton Area Chamber of Com. v. Becerra, 696 F. Supp. 3d 440 (S.D. Ohio Sept. 29, 2023); Nat’l Infusion Ctr.
Ass’n v. Becerra, No. 23-CV-707, 2024 WL 561860 (W.D. Tex. Feb. 12, 2024); AstraZeneca Pharms. v. Becerra, No.
(continued...)
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decisions were all appealed to the United States Courts of Appeals for the Second, Third, Fifth,
and Sixth Circuits.19 To date, the only appeal that has been decided is National Infusion Center v.
Becerra; the Fifth Circuit issued its decision in that case on September 20, 2024.20 This report
explains and contextualizes the plaintiffs’ constitutional claims, and it examines relevant Supreme
Court jurisprudence related to those claims. The report has been updated to discuss the
substantive district court decisions addressing the constitutional issues.21 It concludes with
selected considerations for Congress.
First Amendment Claim
The First Amendment states, in relevant part, that “Congress shall make no law . . . abridging the
freedom of speech.”22 Among other free speech protections, the U.S. Supreme Court has
recognized that Free Speech Clause concerns arise when a person or entity is compelled to say or
23-931, 2024 WL 895036 (D. Del. Mar. 1, 2024); Bristol Myers Squibb Co. v. Becerra, No. 23-3335, 2024 WL
1855054 (D.N.J. Apr. 29, 2024); Janssen Pharms. v. Becerra, No. 23-02818, 2024 WL 1855054 (D.N.J. Apr. 29, 2024);
Boehringer Ingelheim Pharms. v. HHS, No. 23-CV-01103, 2024 WL 3292657 (D. Conn. July 3, 2024); Novo Nordisk
v. Becerra, No. 23-20814, 2024 WL 3594413 (D.N.J. July 31, 2024).
In the Bristol Myers Squibb and Janssen cases, the U.S. District Court for the District of New Jersey decided both cases
in the same opinion, but the cases were not consolidated and each have their own docket number. As such, citations in
this report to these two cases will hereinafter be short-cited as “Bristol Myers Squibb/Janssen.”
19 On March 14, 2024, the National Infusion Center Association appealed the district court’s summary judgment ruling
in its case to the U.S. Court of Appeals for the Fifth Circuit. Case Docket, Nat’l Infusion Ctr. Ass’n v. Becerra, No. 2450180 (5th Cir. Mar. 14, 2024), ECF No. 1. On May 2, 2024, AstraZeneca appealed the district court’s summary
judgment ruling to the U.S. Court of Appeals for the Third Circuit. Notice, AstraZeneca Pharms. v. Becerra, No. 241819 (3d Cir. May 2, 2024), ECF No. 1.
On May 6, 2024, Bristol Myers Squibb and Janssen appealed the district court’s summary judgment rulings in their
cases to the U.S. Court of Appeals for the Third Circuit. Notice, Bristol Myers Squibb Co. v. Sec’y U.S. Dept. of HHS,
No. 24-1820 (3d Cir. May 6, 2024), ECF No. 1; Notice, Janssen Pharms. v. Becerra, No. 24-1821 (3d Cir. May 6,
2024), ECF No. 1. The Third Circuit consolidated the appeals. Order, Bristol Myers Squibb Co. & Janssen Pharms. v.
Sec’y U.S. Dept. of HHS et al., Nos. 24-1820, 24-1821 (3d Cir. May 6, 2024), ECF No. 4.
On July 26, 2024, Boehringer Ingelheim appealed the ruling in its case to the U.S. Court of Appeals for the Second
Circuit. Civil Appeal, Boehringer Ingelheim Pharms. v. Becerra, No. 24-2092, (2d Cir. July 26, 2024), ECF No. 7. On
August 19, 2024, Novo Nordisk appealed the district court’s ruling on summary judgment to the U.S. Court of Appeals
for the Third Circuit. Notice, Novo Nordisk v. Becerra, No. 24-2510 (3d Cir. Aug. 19, 2024), ECF No. 1.
On October 4, 2024, the Chamber of Commerce appealed the ruling in its case to the U.S. Court of Appeals for the
Sixth Circuit. Notice of Appeal, Dayton Area Chamber of Com. v. Becerra, No. 23-156 (S.D. Ohio Oct. 4, 2024), ECF
No. 105.
20 On September 20, 2024, a divided Fifth Circuit panel reversed and remanded the National Infusion Center case to the
district court, finding that the plaintiffs had standing to bring their claims and that those claims did not “arise under” the
Medicare Act. Nat’l Infusion Ctr. Ass’n, No. 24-50180, 2024 WL 4247856 (5th Cir. Sept. 20, 2024), at *1. Because this
ruling did not reach the merits of the plaintiffs’ constitutional claims, it is not discussed here.
21 Thus far, all of the district courts’ decisions in the cases discussed herein were decided on the parties’ summary
judgment motions. In accordance with the Federal Rules of Civil Procedure, a court may grant a motion for summary
judgment when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a).
Of the district court decisions issued thus far, two decisions did not address the merits of the plaintiffs’ constitutional
claims, because they were dismissed on procedural grounds. See Nat’l Infusion Ctr. Ass’n v. Becerra, No. 23-CV-707,
2024 WL 561860 (W.D. Tex. Feb. 12, 2024), rev’d 2024 WL 4247856 (5th Cir. Sept. 20, 2024); Dayton Area Chamber
of Com. v. Becerra, 696 F. Supp. 3d 440 (S.D. Ohio Sept. 29, 2023). Because these decisions did not address the merits
of the constitutional claims, they are not discussed here.
22 U.S. CONST. amend. I. See also CONG. RESEARCH SERV., Amdt 1.7.1 Historical Background on Free Speech Clause,
Constitution Annotated, https://constitution.congress.gov/browse/essay/amdt1-7-1/ALDE_00013537/ (last accessed
Sept. 17, 2024).
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otherwise express a viewpoint that the speaker does not agree with or wish to communicate.23 At
least six plaintiffs have claimed that the IRA violates the First Amendment prohibition against
compelled speech.24
Under the IRA, the manufacturers of selected drugs are required to enter into agreements with
HHS to negotiate, and potentially renegotiate, the MFPs of the drugs.25 If the manufacturers of
selected drugs had failed to sign an agreement with CMS by October 1, 2023, the manufacturers
would have been subject to an excise tax, which is described in further detail below.26 One
plaintiff claimed that signing such agreements amounted to “forced messaging that promotes the
(false) impression that manufacturers . . . agree with prices imposed by HHS decree.”27 Similarly,
another plaintiff alleged that the IRA compels manufacturers to “become a spokesperson for
promoting the Government’s value judgments” by requiring manufacturers to “endorse and
express the viewpoint that they ‘agree’ to HHS-dictated prices, and that those prices are fair.”28
The manufacturer claimed the government could not justify this “compelled-speech regime”
because it lacked a “legitimate reason” to force manufacturers to convey these “misleading”
messages.29 The plaintiffs further argued that Congress could regulate drug prices “without
burdening a speaker with unwanted speech” and that “[p]rice controls do not require speech
controls.”30 It further claimed that the government lacked a “legitimate reason” to force
manufacturers to convey misleading messages.31
In evaluating First Amendment challenges, one critical threshold question is whether the
government is regulating expressive activity, which is protected by the First Amendment, or only
nonexpressive conduct, which is not protected.32 The Supreme Court has observed that “the First
23 See, e.g., 303 Creative LLC v. Elenis, 600 U.S. 570, 586–87 (2023); Nat’l Inst. of Family & Life Advocates v.
Becerra, 585 U.S. 755, 766–67 (2018).
24 Merck Compl. at 3; Chamber of Com. Compl. at 8; Bristol Myers Compl. at 20; Janssen Compl. at 6; Astellas
Compl. at 4; Boehringer Compl. at 6.
25 See 42 U.S.C. § 1192f-3(c).
26 For more information about the excise tax and other penalties to which manufacturers will be subject under the IRA,
see infra “Eighth Amendment Claim.”
27 Merck Compl. at 17; see also Astellas Compl. at 32; Janssen Compl. at 6; Boehringer Compl. at 7.
28 Bristol Myers Compl. at 20.
29 Id.
30 Chamber of Com. Compl. at 54.
31 Id.
32 Determining whether an activity is sufficiently expressive so as to trigger the First Amendment can involve
analyzing various factors. For example, in Rumsfeld v. Forum for Academic and Institutional Rights (FAIR), several
law schools argued that the Solomon Amendment, which conditioned the receipt of federal funding on the schools’
willingness to allow military recruiters equal access to their campuses, violated the First Amendment. FAIR, 547 U.S.
47, 48 (2006). The case arose when a group of law schools restricted campus access to military recruiters because of
the military’s policy on homosexuals. Id. at 51. In response, Congress enacted the Solomon Amendment. Id. The law
schools sued, arguing that the “forced inclusion and equal treatment of military recruiters violated the law schools’ First
Amendment freedoms of speech and association.” Id. at 53. The Court found that “accommodating the military’s
message does not affect the law schools’ speech,” because the schools were not actually speaking by hosting oncampus interviews. Id. at 64.
The Court also did not find the law school’s conduct of hosting military recruiters “inherently expressive,” because
giving the recruiters access to its campus did not “interfere with any message of the school.” Id. The Court observed,
“[l]aw schools remain free under the statute to express whatever views they may have on the . . . policy [with which
they disagree] all the while retaining eligibility for federal funds.” Id. at 60. Because explanatory speech was necessary
to express the conduct, the Court said this was “strong evidence” that the conduct was not so expressive as to warrant
First Amendment protection. Id.; see also United States v. O’Brien, 391 U.S. 367, 376 (1968) (finding that even if a
law regulating conduct contains a “communicative element,” more is needed in order to “bring into play” the First
Amendment).
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Amendment directs that [the] government may not suppress speech as easily as it may suppress
conduct.”33 The Court has also said that the government can prohibit an agreement to engage in
unlawful conduct “brought about through speaking or writing” without violating the First
Amendment.34 “[I]t has never been deemed an abridgement of freedom of speech,” the Court has
stated, “to make a course of conduct illegal merely because the conduct was in part initiated,
evidenced, or carried out by means of language,” either spoken, written, or printed.35
With respect to pricing regulations specifically, in Expressions Hair Design v. Schneiderman, the
Court analyzed whether a state law banning surcharges on credit card purchases violated the First
Amendment.36 The Court observed that a “typical price regulation”37 might not implicate the First
Amendment if it would only regulate conduct.38 However, if a law regulates “the communication
of prices rather than prices themselves,” it regulates “speech,” thus triggering First Amendment
scrutiny.39 The Expressions Court reasoned that the state law regulated speech because rather than
dictating the price of goods, it instead prohibited the vendors’ means of communicating its prices
to customers.40
To date, four of the decisions issued by federal district courts have substantively analyzed
whether the IRA violates the First Amendment, but thus far, none of the plaintiffs’ First
Amendment claims have been successful.41 All the courts that considered this issue held that the
Medicare Drug Price Negotiation Program regulates non-expressive conduct, rather than speech,
and that “[a]ny effect on [p]laintiffs’ speech . . . is merely incidental.”42 Because the courts found
that the IRA regulates conduct, rather than speech, the courts did not address whether the statute
survived First Amendment scrutiny.43
33 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 512 (1996) (plurality opinion).
34 Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 502 (1949); see also Brown v. Hartlage, 456 U.S. 45 (1982).
35 Hartlage, 456 U.S. at 51 (quoting Appeal at 36–37, Hartlage v. Brown, 618 S.W.2d 603 (Ky. Ct. App. 1980)).
36 Expressions Hair Design v. Schneiderman, 581 U.S. 37, 42 (2017). The New York law stated that “[n]o seller in any
sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash . . . .”
Id.
37 Id. at 47. The Court gave an example of a “typical price regulation” as one that would “regulate the amount that a
store could collect” from a buyer. In such an example, the Court said, the regulation would regulate the seller’s
conduct, because by communicating prices to buyers, “the law—by determining the amount charged—would indirectly
dictate the content of [the] speech.” In that example, the Court said that the law would only “incidental[ly]” affect
speech, because its “primary effect” would be on the seller’s conduct. Id.
38 See, e.g., 44 Liquormart, 517 U.S. 484.
39 Expressions Hair Design, 581 U.S. at 48.
40 Id.
41 See Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *10; Boehringer Ingelheim Pharms., 2024 WL 3292657, at
*16; Novo Nordisk, 2024 WL 3594413, at *5.
42 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *10; see also Boehringer Ingelheim Pharms., 2024 WL
3292657, at *16; Novo Nordisk, 2024 WL 3594413, at *5.
43 See, e.g., Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *12.
If a regulation interferes with an expressive activity that triggers First Amendment protection, the next threshold
inquiry a court would consider is the appropriate level of constitutional scrutiny to be applied. The First Amendment’s
protections do not apply with uniformity: Different types of regulations will trigger different levels of scrutiny,
depending on the type of speech being regulated and how the regulation operates. See generally, CRS Report R45700,
Assessing Commercial Disclosure Requirements under the First Amendment, by Valerie C. Brannon (2019). For
example, commercial speech—defined as speech that relates “solely to the economic interests of the speaker and its
audience”—is typically afforded intermediate scrutiny under the Central Hudson test. Cent. Hudson Elec. Corp. v. Pub.
Serv. Comm’n, 447 U.S. 557, 561 (1980). As the name suggests, “intermediate” scrutiny is a medium level of
constitutional scrutiny. The Central Hudson test requires the government to show that the regulation relates to a
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In Bristol Myers Squibb and Janssen, for example, the court distinguished Expressions Hair
Design, reasoning that the pricing law at issue in that case, which the Supreme Court said was not
a “typical price regulation,” was distinct from the IRA, because it regulated the way in which
merchants communicated the price of goods, rather than the amount they charged.44 The court
found that the purpose of the Medicare Drug Price Negotiation Program is to set MFPs for certain
Medicare drugs, and it characterized the agreements and negotiations as “incidental mechanisms
the government is using to set those prices.”45
Several manufacturers also took issue with the IRA’s terminology (e.g., words like “negotiate”
and “maximum fair price”), arguing that signing an agreement that uses those terms also signals
their agreement with the price.46 The Bristol Myers Squibb and Janssen court, however, was
unpersuaded by the manufacturers’ arguments that signing such “ordinary commercial contracts”
would constitute expressive conduct.47 The court instead looked closely at the language used in
the IRA, finding that statutory terms like “maximum fair price” were “terms of art” that have
statutory definitions.48 The court emphasized that nothing in the statute keeps the manufacturers
from criticizing the MFP, and thus the court “decline[d] . . . to interpret the [p]rogram’s terms
beyond the scope of their statutory meaning.”49 Similarly, in Boehringer Ingelheim, the court
clarified that the IRA does not compel speech simply because an “uninformed observer might
read [its] terms out of context,” reasoning that such a “speculative and incidental” burden to
speech would not implicate the First Amendment.50
Further, the courts also found that the agreements could not compel speech in violation of the
First Amendment because a drug manufacturer’s participation in the Medicare Drug Price
Negotiation Program is voluntary, and thus “the [a]greement[s] [do] not ‘compel’ [the
manufacturers] to do anything.”51 In Boehringer Ingelheim, the court analyzed whether the
Medicare program was voluntary or compulsory, given the government’s significant presence in
the pharmaceutical market as a purchaser of drugs.52 While the manufacturer argued that signing
the price agreement with HHS conveyed a public message that it “voluntarily agreed to
participate in the [p]rogram,”53 the court said that the company could have withdrawn from
participation in Medicare before the requisite deadline to sign the contract.54
“substantial” governmental interest that is “directly advance[d]” by the law. Id. at 566. Central Hudson, however, is not
the only standard that could apply. Government actions compelling speech are usually subject to strict scrutiny—a
rigorous standard that laws rarely satisfy, Nat’l Inst. of Family & Life Advocates v. Becerra, 585 U.S. 755, 766–67
(2018), but the Supreme Court has sometimes applied a standard of review even less stringent than intermediate
scrutiny to commercial disclosure requirements. Id. at 767–69; e.g., Zauderer v. Off. of Disciplinary Couns., 471 U.S.
626, 651 (1985).
44 Bristol Myers Squibb/Janssen., 2024 WL 1855054, at *11 (citing Expressions Hair Design, 581 U.S. 37, 47).
45 Id.
46 Id.; see also Boehringer Ingelheim Pharms., 2024 WL 3292657, at *15.
47
Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *11.
48 Id.
49 Id. at *12.
50 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *16 (citing Ark. Times LP v. Waldrip, 37 F.4th 1386, 1390,
1394 (8th Cir. 2022)).
51 Id.; see also Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *9 (“A threshold issue for their Compelled Speech
claim is whether Plaintiffs are compelled to participate in the Program.”).
52 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *12.
53 Id. at *15.
54 Id. at *16.
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Fifth Amendment Claims
The Fifth Amendment provides, “No person shall be . . . deprived of life, liberty, or property,
without due process of law; nor shall private property be taken for public use, without just
compensation.”55 The first clause quoted above, known as the Due Process Clause, requires that
the government provide sufficient (“due”) procedures before it deprives a person of life, liberty,
or property.56 The second clause, known as the Takings Clause, allows the government to seize a
person’s property for a public use, but only if the government pays fair compensation for the
taking.57 All of the plaintiffs argue that the IRA violates some provision of the Fifth Amendment,
with some claiming Due Process Clause violations58 and others claiming Takings Clause
violations.59 Each of these claims, and the district courts’ rejection of the claims, is explored in
further detail below.
Due Process Clause Claim
Several plaintiffs argued that the IRA violated the Fifth Amendment’s Due Process Clause by
depriving drug manufacturers of their property without the requisite procedural safeguards.60 The
plaintiffs alleged various property rights, including “investment-backed patent rights and [a]
common-law right to sell their products at market prices free from arbitrary and inadequately
disclosed governmental constraints.”61 The plaintiffs insisted that the IRA does not comply with
the core principles of procedural due process—notice and “the opportunity to be heard”62—
because they were not given sufficient notice of the IRA’s “fundamental change[s] to the legal
landscape,” which affected investments they made before the IRA was passed.63 They further
argued that because some aspects of CMS’s guidance implementing the program were finalized
without stakeholder input, there is “no guarantee that they will have an opportunity to be heard on
the key decisions that HHS will make over the next three years before the first [MFP] takes effect
in 2026.”64 The plaintiffs also claimed that the law runs afoul of the Due Process Clause because
“the IRA expressly deprives manufacturers of any judicial review of HHS’s key decisions.”65
The Supreme Court has established that “[t]he first inquiry in every due process challenge is
whether the plaintiff has been deprived of a protected interest in ‘property’ or ‘liberty.’”66
Assuming the plaintiff can demonstrate such a deprivation, the plaintiff’s interests must then be
55 U.S. CONST. amend. V.
56 See CONG. RESEARCH SERV., Amdt 5.5.1 Overview of Due Process, Constitution Annotated,
https://constitution.congress.gov/browse/essay/amdt5-5-1/ALDE_00013721/ (last accessed Sept. 17, 2024).
57 See CONG. RESEARCH SERV., Amdt 5.9.1 Overview of Takings Clause, Constitution Annotated,
https://constitution.congress.gov/browse/essay/amdt5-9-1/ALDE_00013280/ (last accessed Sept. 17, 2024).
58 Chamber of Com. Compl. at 40; PhRMA Compl. at 6.
59 Merck Compl. at 15; Bristol Myers Compl. at 26.
60 PhRMA Compl. at 43; Chamber of Com. Compl. at 40; AstraZeneca Compl. at 30.
61 PhRMA Compl. at 43.
62 See Mathews v. Eldridge, 424 U.S. 319, 333 (1976); Armstrong v. Manzo, 380 U.S. 545, 552 (1965).
63 PhRMA Compl. at 47.
64 Chamber of Com. Compl. at 40; see also AstraZeneca Compl. at 30.
65 Chamber of Com. Compl. at 40; see also PhRMA Compl. at 43; Astellas Compl. at 4. For more information about
the Program’s limitations on judicial review, see CRS Report R47555, Implementation of the Medicare Drug Price
Negotiation Program: Centers for Medicare and Medicaid Guidance and Legal Considerations, by Hannah-Alise
Rogers (2023).
66 Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 (1999).
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weighed against the government’s interests.67 The Supreme Court created the basic framework for
considering procedural due process claims in Mathews v. Eldridge.68 The Mathews factors address
the amount of process required before the government may impair a protected property or liberty
interest.69 This fact-dependent analysis weighs (1) the private interest affected by the
government’s action; (2) “the risk of an erroneous deprivation” of an interest given the current
procedures and the value of additional “procedural safeguards”; and (3) the government’s interest,
including the “function involved” and any burden that additional procedures would entail.70
To date, three district courts have considered and rejected the manufacturers’ arguments that the
IRA violates the Due Process Clause.71 All three courts began their analyses of these claims by
discussing the manufacturers’ constitutionally protected interests.72 The companies claimed a
variety of protected property interests, including property interests in the selected drugs they
manufacture and the data they collect on those drugs; the right to sell their products to Medicare
for fair market value; and the right to continue to sell their products to Medicare.73 The courts
largely agreed with the government’s position that the IRA does not infringe on any of the
plaintiffs’ rights, whether or not they are constitutionally protected.74 Because the manufacturers
did not sufficiently demonstrate any violation of a constitutionally protected property interest, the
courts did not undertake a balancing of the interests or consider the sufficiency of the
administrative process.75
67 See, e.g., Mathews v. Eldridge, 424 U.S. 319 (1976).
68 Chamber of Com. Compl. at 44; see also PhRMA Compl. at 50–52; see also Mathews v. Eldridge, 424 U.S. 319
(1976).
69 424 U.S. 319, 334–35.
70 Id. at 335. For example, in Mathews, a plaintiff sued the Social Security Administration (SSA) after termination of
his disability benefits, and the Court addressed whether the Fifth Amendment required that he be given a hearing prior
to the termination. Id. at 323. The Court cautioned that “[d]ue process is flexible and calls for such procedural
protections as the particular situation demands.” Id. at 334 (quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972)).
The Court reviewed the “elaborate” procedures for terminating benefits under the Social Security Act and the various
safeguards the SSA put in place to avoid a mistaken deprivation of benefits, and it considered how to balance the high
cost of additional safeguards with the need to conserve “scarce fiscal and administrative resources.” Id. at 348. After
weighing the three factors, the Court’s majority held that an evidentiary hearing was not required prior to the benefit
determination, and that the agency’s administrative procedures were sufficient to meet the minimum standard required
by the Fifth Amendment. Id. at 349. The Court further observed: “The judicial model of an evidentiary hearing is
neither a required, nor even the most effective, method of decision-making in all circumstances. The essence of due
process is the requirement that ‘a person in jeopardy of serious loss [be given] notice of the case against him and
opportunity to meet it.’” Id. at 348 (alteration in original) (quoting Joint Anti-Fascist Refugee Comm. v. McGrath, 341
U.S. 123, 171–72 (1951)).
71 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *19; Novo Nordisk v. Becerra, No. 23-20814, 2024 WL
3594413, at *5 (D.N.J. July 31, 2024); AstraZeneca Pharms., 2024 WL 895036, at *13 (D. Del. Mar. 1, 2024).
72
Boehringer Ingelheim Pharms., 2024 WL 3292657, at *7; Novo Nordisk, 2024 WL 3594413, at *5; AstraZeneca
Pharms., 2024 WL 895036, at *14.
73 AstraZeneca Pharms., 2024 WL 895036, at *14. The AstraZeneca court also acknowledged that the drugmaker
claimed a protected interest in the patent rights for its products, but the court found that the company “never identifie[d]
a patent or exlain[ed] how the IRA affects or could affect a patent right.” Id. Because AstraZeneca’s arguments about
its protected patent rights were tied to its arguments about its right to sell its drug above the MFP, the court found that
“the property interest encompassed by AstraZeneca’s alleged ‘patent rights’ is at bottom the ability to sell products to
Medicare beneficiaries at prices above what the IRA requires.” Id.
74 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *7; Novo Nordisk, 2024 WL 3594413, at *5; AstraZeneca
Pharms., 2024 WL 895036, at *14.
75 See Novo Nordisk, 2024 WL 3594413, at *6.
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The government did not dispute that the manufacturers had a constitutionally protected property
interest in their selected drugs.76 So far, though, the courts have all agreed with the government’s
argument that the IRA did not infringe upon these interests because participation in the Medicare
program is voluntary.77 In Novo Nordisk, the court found that because the program is voluntary,
the companies “are not forced to make any sales to Medicare in the first place.”78 Further, in
Boehringer Ingelheim, the court thoroughly analyzed the options for drug companies that did not
wish to comply with the terms of the IRA, concluding that manufacturers could choose to
withdraw from participation in the Medicare program “without penalty” before the MFP became
effective.79 The court did, however, reject the government’s argument that a drug company could
simply divest its interest in its selected drug (Jardiance) if it did not wish to participate in the
program, highlighting that the Supreme Court has held that the divestment of a property interest
does not prevent a violation of the Fifth Amendment.80
Reviewing courts also rejected the companies’ arguments that the IRA infringed upon their due
process rights to sell drugs to Medicare at fair market value. As the court put it in the AstraZeneca
case, “[n]o one . . . is entitled to sell the [g]overnment drugs at prices the [g]overnment won’t
agree to pay,” citing to the Supreme Court’s finding that “the [g]overnment enjoys the
unrestricted power to . . . fix the terms and conditions upon which it will make needed
purchases.”81 The court characterized the IRA as “simply establish[ing] [the] maximum prices the
[g]overnment will pay for selected drugs” and found that the law did not require AstraZeneca to
76 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *8; Novo Nordisk, 2024 WL 3594413, at *6; AstraZeneca
Pharms., 2024 WL 895036, at *13.
77 Novo Nordisk, 2024 WL 3594413, at *6; Boehringer Ingelheim Pharms., 2024 WL 3292657, at *10; AstraZeneca
Pharms., 2024 WL 895036, at *15.
78 Novo Nordisk, 2024 WL 3594413, at *6.
79 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *8. The court discussed CMS’s “accelerated path” for a drug
manufacturer to terminate its agreement with the agency (i.e., terminating a manufacturer agreement within 30 days of
a notice of intention to withdraw), finding that this administrative mechanism was a permissible interpretation of the
Medicare Act’s statutory language. Id. at *9 (citing 42 U.S.C. §§ 1395w-114a(b)(4)(B)(i), 1395w-114c(b)(4)(B)(i)).
Even if the manufacturer is required to comply with the IRA’s directives during the 30 days during which CMS is
processing its withdrawal, the court found that this did not run afoul of the Due Process Clause, because “mere
participation in the [Medicare Drug Price Negotiation Program] . . . does not constitute a deprivation of property.” Id. at
*10.
80 Id. at *11 (citing Horne v. Dept. of Agric., 576 U.S. 350 (2015)). The court did not address the parties’ final
arguments about whether Boehringer Ingelheim could stop selling Jardiance to Medicare altogether. Boehringer
Ingelheim Pharms., 2024 WL 3292657, at *11 (“I need not decide whether manufacturers can evade the Program (or its
penalties) by refusing to sell the [s]elected [d]rug to Medicare beneficiaries. Even if they cannot . . . that does not
deprive manufacturers of their property, because they have the option to withdraw from Medicare and Medicaid.”).
81 Id. at *15 (quoting Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940)).
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sell its products to Medicare.82 On the contrary, the court held that the IRA presented “a potential
economic opportunity” to AstraZeneca that the company “is free to accept or reject.”83
Takings Clause Claim
Some plaintiffs also raised distinct Fifth Amendment claims under the Takings Clause, alleging
that the implementation of the IRA constitutes a taking of both tangible property (drugs and
biological products) and intellectual property (patents) without just compensation, as well as a per
se taking.84 One plaintiff claimed that “the singular purpose of this scheme [in the IRA] is for
Medicare to obtain prescription drugs without paying fair market value.”85 Another alleged that
the program “is akin to the Government taking your car on terms that you would never
voluntarily accept and threatening to also take your house if you do not ‘agree’ that the taking
was ‘fair.’”86
As with the Due Process Clause allegations discussed above, the manufacturers argued that their
drugs, data, and patents are property and that the government is “forcing [them] to provide third
parties with ‘access’ to [their] products at steeply discounted prices.”87 A few of the
manufacturers stated that such a “compelled transfer of title effects a classic, per se taking.”88 The
plaintiffs further alleged that the program’s pricing mechanism is not “just compensation”
because it is not sufficiently connected to fair market value and, in fact, the statute requires the
price to be set “significantly below the drug’s market value.”89
The Supreme Court has clarified that the Takings Clause “does not prohibit the taking of private
property, but instead places a condition on the exercise of that power” by requiring the
government to fairly compensate someone whose property rights are taken.90 To determine
whether a taking has occurred, a party must demonstrate that the claimed property interest at issue
is protected by the Takings Clause.91
82 Id. The court also disagreed with AstraZeneca’s reference to the Third Circuit’s decision in Sanofi-Aventis LLC v.
HHS, 58 F.4th 696 (3d Cir. 2023), judgment entered, No. 21-3167, 2023 WL 1325507 (3d Cir., Jan. 30, 2023), in
support of its argument that participation in the Medicare program was involuntary. AstraZeneca Pharms., 2024 WL
895036, at *15. The Sanofi-Aventis case arose from a disputed provision of the 340B statute, and as part of its decision
in that case, the Third Circuit said, in dicta, that “the federal government dominates healthcare and uses [its] market
power to get drug makers to subsidize healthcare.” Id. (first and third alterations in original) (quoting AstraZeneca’s
Brief in Opposition to Defendants’ Cross-Motion for Summary Judgment and Reply in Support of Plaintiffs’ Motion
for Summary Judgment at 48, No. 23-CV-931 (filed Dec. 1, 2023, D. Del. 2023) (ECF No. 58)). The AstraZeneca court
acknowledged that because the federal government is the largest payer of prescription drugs, manufacturers have a
“powerful incentive” to participate in 340B. Id. The court stated, however, that “it does not follow, and the court did
not say or imply in Sanofi[-Aventis], that the 340B Program or any other law requires a drug manufacturer to
participate in the 340B Program or any other Medicare Program.” Id.
83 AstraZeneca Pharms., 2024 WL 895036, at *16.
84 Merck Compl. at 15; Bristol Myers Compl. at 26; Astellas Compl. at 4; Janssen Compl. at 27; Boehringer Compl. at
34.
85 Merck Compl. at 2.
86 Janssen Compl. at 6.
87 Merck Compl. at 16; see also Boehringer Compl. at 35.
88 Merck Compl. at 16; see also Boehringer Compl. at 36.
89 Bristol Myers Compl. at 18; Astellas Compl. at 28.
90 Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536 (2005) (quoting First English Evangelical Lutheran Church v.
Cnty. of L.A., 482, U.S. 304, 314 (1987)); see also CONG. RESEARCH SERV., Amdt 5.9.2 Public Use and Takings
Clause, Constitution Annotated, https://constitution.congress.gov/browse/essay/amdt5-9-2/ALDE_00013281/ (last
accessed Sept. 17, 2024).
91 See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000-01 (1984).
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The Takings Clause applies only to “private property” interests protected under the Fifth
Amendment.92 Personal property (such as pills or vials of a drug) is protected,93 but the Supreme
Court has never directly held that patents are property protected by the Takings Clause.94
Historically, the Court has recognized certain physical invasions of property under a per se rule:
an appropriation of property, even if minor, is a taking that requires compensation.95 For example,
in Loretto v. Teleprompter Manhattan CATV Corp., the Court held that a law requiring landlords
to permit cable companies to install equipment on the exteriors of their buildings constituted a per
se taking for the purposes of the Takings Clause, because the law authorized a permanent, if only
minimal, physical occupation of the property.96 Other instances in which the Court has recognized
a per se taking are when the government took title to a share of a farm’s agricultural crop97 and
when an owner was deprived of all his property’s economic use or value.98
When a physical invasion has not occurred, the Court has still recognized a “regulatory taking”
when a government action significantly affects property rights, holding that if the regulation
“goes too far[,] it will be recognized as a taking.”99 Although the Court has avoided a “set formula
to determine where regulation ends and a taking begins”100 and has stated that regulatory takings
cases require “essentially ad hoc, factual inquiries,”101 the Court has established some general
principles for determining when regulatory takings occur.102
92 See Ruckelshaus, 467 U.S. at 1001. For more information, see CONG. RESEARCH SERV., Amdt 5.9.3 Property Interests
Subject to Takings Clause, Constitution Annotated, https://constitution.congress.gov/browse/essay/amdt5-93/ALDE_00013282/ (last accessed Sept. 17, 2024).
93 See Horne v. Dept. of Agric., 576 U.S. 350 (2015).
94 In Horne, the Court reiterated its previous observation that “[a patent] confers upon the patentee an exclusive
property in the patented invention which cannot be appropriated or used by the government itself, without just
compensation, any more than it can appropriate or use without compensation land which has been patented to a private
purchaser.” 576 U.S. 359–60 (alteration in original) (quoting James v. Campbell, 104 U.S. 356, 358 (1882)).
95 See, e.g., Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434–35 (1982) (“In short, when the
‘character of the governmental action’ is a permanent physical occupation of property, our cases uniformly have found
a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or
has only minimal economic impact on the owner.” (quoting Penn Cent. Transp. v. City of New York, 438 U.S. 104,
121 (1978)).
96 Id.
97 Horne v. Dep’t of Agric., 576 U.S. 350, 361 (2015).
98 See Agins v. City of Tiburon, 477 U.S. 255, 260 (1980); Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992).
99 Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). See also CONG. RESEARCH SERV., Amdt 5.9.5 Early Jurisprudence
on Regulatory Takings, Constitution Annotated, https://constitution.congress.gov/browse/essay/amdt5-95/ALDE_00013284/ (last accessed Sept. 17, 2024).
100 Penn Cent. Transp. Co., 438 U.S. at 124.
101 Id.
102 For example, in Penn Central Transportation Co. v. City of New York, the Court analyzed whether a government
regulation amounted to a taking. Factors considered by the Court included (1) “[t]he economic impact of the
regulation”; (2) whether the regulation interfered with “distinct investment-backed expectations”; and (3) the character
of the government’s action. Id. at 124. For more information about the Penn Central analysis and how it is used to
evaluate regulatory takings, see CONG. RESEARCH SERV., Amdt 5.9.6 Regulatory Takings and Penn Central Framework,
Constitution Annotated, https://constitution.congress.gov/browse/essay/amdt5-9-6/ALDE_00013285/ (last accessed
Sept. 17, 2024). Regarding the third factor, the Court explained that a taking “may more readily be found when the
interference with property can be characterized as a physical invasion by a government than when interference arises
from some public program adjusting the benefits and burdens of economic life to promote the common good.” Penn
Cent. Transp. Co., 438 U.S. at 124 (citation omitted).
The Court applied the Penn Central framework in Ruckelshaus v. Monsanto, which concerned public disclosure of
trade secrets that were submitted by a pesticide manufacturer to the Environmental Protection Agency (EPA).
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To date, three district courts have reached the merits of the plaintiffs’ takings claims, and all have
found that the Medicare Drug Price Negotiation Program does not amount to a taking in violation
of the Fifth Amendment.103 In Bristol Myers Squibb and Janssen, the court first analyzed whether
participation in the program amounts to a physical taking, distinguishing the Supreme Court’s
decision in Horne v. Department of Agriculture, where the Court held that the government’s
requirement that raisin growers set aside a portion of their yearly harvest without compensation
was a taking.104 Unlike in Horne, where “the only way for raisin growers to avoid the . . .
requirement [to give up part of their crop] was to stop selling raisins altogether,” in Bristol Myers
Squibb and Janssen’s cases, the manufacturers could just stop selling their drugs to Medicare to
avoid regulation.105 The court found that the IRA is not requiring the manufacturers to set aside
the selected drugs for the government’s use, and neither does the program “require a
manufacturer to physically transmit or transport drugs at the agreed price.”106 Thus, the court
concluded it is not a taking.107
Similarly, the court in Boehringer Ingelheim said that the IRA’s selection of drugs for price
negotiation is not a taking because the company could withdraw from participation in Medicare
before a taking of its property occurred.108 The court reviewed caselaw from the Second Circuit
(which has jurisdiction over cases appealed from the federal district court in Connecticut) and
from sister circuits that analyzed the constitutionality of various Medicare payment limitations.109
For example, the court pointed to Garelick v. Sullivan, wherein the Second Circuit held that no
Ruckelshaus v. Monsanto, 467 U.S. 986, 990 (1983). The Court acknowledged that the manufacturer held a property
interest in the data containing trade secrets, but it held that the EPA regulation requiring disclosure did not constitute a
taking when a manufacturer did not have a “reasonable investment-backed expectation” that the data would remain
confidential. Id. at 1005. The Court highlighted that the manufacturers voluntarily participated in a regulatory scheme
that required their products to be registered with the federal government and that such participation allowed them to sell
their products in the U.S. market. Id. The Court observed that “as long as [the manufacturer] is aware of the conditions
under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a
voluntary submission of data by an applicant in exchange for the economic advantages of a [product] registration can
hardly be called a taking.” Id. at 1007. The Court also found that the disclosure requirement was rationally related to
the legitimate government interest of ensuring safety in the sales and use of pesticides.102 For these reasons, the Court
held that the manufacturer did not have a “reasonable investment-backed expectation” and that no regulatory taking
occurred. Ruckelshaus, 467 U.S. at 1005.
103 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *9; Boehringer Ingelheim Pharms., 2024 WL 3292657, at *10.
104 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *4–5 (citing Horne v. Dept. of Agric., 576 U.S. 350, 354–56
(2015)). The Boehringer Ingelheim court also distinguished Horne on the basis that, in that case, the property owners
did not have a choice of whether or not to turn over a portion of their raisin crop to the government. Boehringer
Ingelheim Pharms., 2024 WL 3292657, at *14.
105 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *6.
106 Id. The court also distinguished the Supreme Court’s per se taking rule in Cedar Point Nursery v. Hassid, 594 U.S.
139 (2021). Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *6. In that case, a majority of the Court held that a
state law regulation which gave certain labor groups a right to access an employer’s property to solicit support for
unionizing workers constituted a per se physical taking. Cedar Point Nursey, 594 U.S at 162. Bristol Myers Squibb and
Janssen argued that, according to Cedar Point, a “per se taking occurs when the [g]overnment forces a property owner
to transfer possession or title,” and that the IRA’s establishment of the MFP “forces the manufacturers to transfer the
selected drugs to those third parties at a price demanded by the [g]overnment.” Bristol Myers Squibb/Janssen, 2024
WL 1855054, at *6 (emphasis omitted) (quoting Memorandum of Law in Support of Defendants’ Opposition to
Plaintiff’s Motion for Summary Judgment and Cross-Motion, Bristol Myers Squibb v. Becerra et al., Nos. 23-CV03335, 3818 (filed Oct. 16, 2023, D.N.J.) (ECF No. 38-1)). The court distinguished Cedar Point, reasoning that the
IRA does not require the company to “give or sell” its drugs to the government. Id. The court agreed with the
government’s argument that the IRA “does not authorize the government to requisition a manufacturer’s drugs or other
property . . . nor does [it] require a manufacturer to relinquish any drug it does not wish to sell.” Id.
107 Id.
108 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *10.
109 Id. at *12.
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taking had occurred after HHS lowered the Medicare Part B payment rate for certain anesthesia
services.110 Although the providers in Garelick claimed that the lowered payment rate resulted in
a taking without just compensation, the court held that the providers voluntarily chose to
participate in the Medicare program and were not required to treat Medicare patients.111 The court
rejected the argument that the providers’ participation in Medicare was involuntary because to
choose not to serve Medicare patients would be financially unfeasible.112 The Boehringer
Ingelheim court also reviewed similar caselaw from other circuits, noting that providers who
disagree with a CMS payment condition may freely withdraw their Medicare participation and so
avoid a taking.113
Eighth Amendment Claim
The Eighth Amendment provides that “[e]xcessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted.”114 At least three plaintiffs claimed that the
IRA’s excise taxes and penalties are in fact punishments designed to force manufacturers to
comply with the statute’s price negotiation scheme.115 The IRA amended the Internal Revenue
Code to create an excise tax on the sale of selected drugs if a manufacturer fails to execute a price
negotiation agreement with the Secretary; fails to agree to an initial or renegotiated MFP; or does
not submit requested information about the drug to the Secretary.116 The tax is calculated based on
a percentage of the sales during the noncompliance period, starting with 65% for the first 90 days
of noncompliance, and reaching up to 95% after 270 days.117 In addition, separate provisions
impose civil money penalties on manufacturers that fail to sell their drug at or below the MFP;118
violate the terms of the pricing agreement;119 or provide false information to the Secretary.120
The plaintiffs are particularly concerned with the impact of the excise tax, which one
characterized as a “massive penalty.”121 Another plaintiff asserted that “Congress well understood
that, in practice, the threat of this ruinous excise tax would force manufacturers to accept
whatever price HHS demands.”122 The parties pointed to the Joint Committee on Taxation’s
estimate of a similar iteration of the excise tax found in previous legislative proposals as raising
“no revenue whatsoever,” as well as a similar Congressional Budget Office projection.123
110 Id. (citing Garelick v. Sullivan, 987 F.2d 913, 915-17 (2d Cir. 1993).
111 Id.
112 Id.
113 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *10.
114 U.S. CONST. amend. VIII.
115 Chamber of Com. Compl. at 47; PhRMA Compl. at 55; Boehringer Compl. at 39.
116 Inflation Reduction Act of 2022, Pub. L. No. 117-169, § 11003, 136 Stat. 1818 (codified at 26 U.S.C. § 5000D).
117 26 U.S.C. § 5000D(d). For an example of how the excise tax would be calculated, see CRS Report R47396, Health
Care Provisions of the Budget Reconciliation Measure P.L. 117-169, coordinated by Katherine M. Kehres (2023).
118 42 U.S.C. § 1320f-6(a). The civil monetary penalty is calculated by multiplying by 10 the difference between the
MFP and the sale price. Id. For example, if a manufacturer sold 100 units of a selected drug at $10 per unit, the total
sale would be $1,000. But if the MFP for that selected drug was $5, the manufacturer would be liable for $5,000 (10
times the number of units sold (100) and the difference between the sale price ($10) and the MFP ($5).
119 The penalty is $1,000,000 for each day of a violation. Id. § 1320f-6(c).
120 The penalty is $1,000,000 for each item of false information. Id. § 1320f-6(d).
121 Boehringer Compl. at 39.
122 PhRMA Compl. at 25.
123 PhRMA Compl. at 25; Chamber of Com. Compl. at 28; Boehringer Compl. at 40. The estimate is based on the Build
Back Better Act, H.R. 5376 (117th Cong. 2022), which proposed a similar excise tax.
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Manufacturers argued that such projections demonstrate that Congress intended the excise tax as
a punishment for noncompliant manufacturers, because noncompliance is so costly that no
manufacturer would risk being subject to the tax.124 Another plaintiff argued that “[r]egardless of
its name, the IRA’s ‘excise tax’ is a penalty,” and that “no manufacturer could possibly afford to
pay” the amounts owed for noncompliance.125
The Supreme Court has found that the purpose of the Excessive Fines Clause is to “limit the
government’s power to punish,”126 and the Court has applied the clause to situations in which
fines are both imposed by and paid to the government.127 If a fine can properly be characterized as
punishment so as to fall within the purview of the Excessive Fines Clause, the Court has also
analyzed whether fines are excessive so as to run afoul of the Eighth Amendment.128
124 PhRMA Compl. at 25.
125 Chamber of Com. Compl. at 48.
126 See, e.g., Austin v. United States, 509 U.S. 602, 607–09 (1993) (“Some provisions of the Bill of Rights are
expressly limited to criminal cases. . . . The text of the Eighth Amendment includes no similar limitation. Nor does the
history of the Eighth Amendment require such a limitation.”) Id. at 607–08. See also United States v. Bajakajian, 524
U.S. 321 (1998) (holding that a punitive civil forfeiture violated the Excessive Fines Clause); but see Browning-Ferris
Indus., 492 U.S. 257 (1989) (holding that the Eighth Amendment’s prohibition on excessive fines did not apply to an
award of punitive damages in a civil suit between private parties).
127 See Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 266–67 (1989).
Although historically applied only to criminal cases, the prohibition on excessive fines can also apply in civil cases.
See, e.g., Browning-Ferris, where, in considering the legislative history behind the Excessive Fines Clause, the Court
stated, “Congress did not discuss what was meant by the term ‘fines,’ or whether the prohibition had any application in
the civil context.” Id. at 264–65. The Court further observed: “Bail, fines, and punishment traditionally have been
associated with the criminal process, and by subjecting the three to parallel limitations the text of the Amendment
suggests an intention to limit the power of those entrusted with the criminal-law function of government.” Id. at 263
(quoting Ingraham v. Wright, 430 U.S. 651, 644 (1977)); but see Austin, 509 U.S. at 608 (observing that “some
provisions of the Bill of Rights are expressly limited to criminal cases. . . . The text of the Eighth Amendment includes
no similar limitation. Nor does the history of the Eighth Amendment require such a limitation).” The Supreme Court
denied a 2023 petition for certiorari in a case in which the Fourth Circuit decided that a civil tax penalty imposed by the
IRS was not an excessive fine. See Toth v. United States, 143 S. Ct. 552 (2023). Justice Gorsuch filed a dissenting
opinion in which he expressed that “taking up this case would have been well worth our time.” Id. at 553 (Gorsuch, J.,
dissenting).
The Court has made clear that the threshold question “is not . . . whether [the action] . . . is civil or criminal, but rather
whether it is punishment.” Austin, 509 U.S. at 610. When analyzing whether a fine constitutes punishment, the Court
has looked at the history of the action and whether it could be “properly considered punishment today.” Id. at 619. It is
unclear whether the Court would consider a civil tax imposed by the Internal Revenue Code to be a “fine” for the
purpose of applying the Excessive Fines Clause. In 2016, the United States Bankruptcy Court for the Northern District
of Texas observed, “The parties have not cited, nor has the Court located through its own research, a single case that
holds that a tax penalty . . . . is a fine under the Excessive Fines Clause, let alone an excessive fine . . . . In sum, those
courts that have been faced with the dilemma of how to apply an Excessive Fines Clause analysis to civil tax penalties
have all arrived at largely the same answer—i.e., civil tax penalties . . . are not fines, and therefore the Excessive Fines
Clause is not applicable to them.” In re Wyly, 552 B.R. 338, 613 (Bankr. N.D. Tex. 2016). The Court has not addressed
whether the reasoning from Wyly would extend to civil tax penalties in the Internal Revenue Code.
128 For example, in 1998, the Court decided United States v. Bajakajian, which addressed whether a forfeiture of cash
constituted a punishment and whether the punishment was considered “excessive” for the purposes of the Eighth
Amendment. 524 U.S. at 328, 334 (1998). The case arose when the government sought forfeiture of the full amount of
money that was smuggled onto an international flight in violation of federal law. Id. at 325. Justice Thomas, writing for
a five-Justice majority, held that under the Eighth Amendment, a fine is unconstitutional when its amount is grossly
disproportionate to the gravity of the conduct it was designed to discourage. Id. at 325. Observing that the amendment’s
text and history provided few insights as to the level of disproportionality required, the Court undertook a fact-specific
inquiry to compare the amount of the forfeiture against the gravity of the offense for which the defendant had pleaded
guilty. Id. at 336–37. The majority held that forfeiture of the entire amount would violate the Excessive Fines Clause,
reasoning that the harm caused was minimal, as the crime underlying the forfeiture was a failure to report the transport
(continued...)
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Of the three plaintiffs who challenged the IRA on the basis that it violated the Eighth Amendment
Excessive Fines Clause, to date only one of the courts has discussed it in detail: Boehringer
Ingelheim v. HHS.129 In that case, the court denied the manufacturer’s motion for summary
judgment, finding that the court lacked jurisdiction over the challenge under the Anti-Injunction
Act (AIA).130 With a few exceptions, the AIA states that a person may not bring a claim to
restrain “the assessment or collection of any tax,”131 and the Supreme Court has observed that the
purpose of the law, in part, is to allow for the collection of taxes without court intervention.132
One exception to the AIA’s jurisdictional bar, known as the Williams Packing exception, says that
a plaintiff may bring such a challenge if he can demonstrate an irreparable injury and a certainty
of success on the merits.133 The court found, however, that Boehringer Ingelheim could not meet
either of the requirements for the exception to apply to give the court jurisdiction.134
First, the court considered whether the company would suffer an irreparable injury if it could not
bring the claim.135 The court was unpersuaded by the manufacturer’s argument that it would be
irreparably harmed by “the extraordinary magnitude of the tax,” finding instead that the company
could just as easily pay a portion of the tax up front and then file suit for a refund.136 The court
stated that it was unlikely that the company would even have to pay the entire amount of the tax
before challenging it, because “the IRS would likely exercise forbearance” of the total amount
during the adjudication of the refund suit.137 The court reasoned that if the manufacturer prevailed
in a refund suit, the IRS could not require payment, but if the manufacturer’s suit failed, then “the
IRS could constitutionally require it to pay the tax, which would mean the tax inflicted no
actionable harm.”138
Next, in determining whether the company was entitled to an exception to the AIA’s jurisdictional
bar, the court addressed the plaintiff’s certainty of success on the merits of its claim.139 The court
found that because Boehringer Ingelheim’s claim was “novel,” it could not “meet this demanding
standard.”140 The court observed that the plaintiff had not identified a “case in which a court has
applied the Excessive Fines Clause to a monetary amount that was not connected to criminal
conduct or a criminal proceeding.”141 In addition, the court was persuaded by the government’s
of money, not the transport itself. Id. at 337, 339. Four other justices dissented in Bajakajian, arguing, “For the first
time in its history, the Court strikes down a fine as excessive under the Eighth Amendment. The decision is disturbing
both for its specific holding and for the broader upheaval it foreshadows.” Id. at 344 (Kennedy, J., dissenting).
129 Boehringer Ingelheim Pharms. v. HHS, No. 23-CV-01103, 2024 WL 3292657 (D. Conn. July 3, 2024), appeal
docketed, 24-2092 (2d Cir. Aug. 8, 2024). The other two cases, brought by PhRMA and the U.S. Chamber of
Commerce, were dismissed on procedural grounds, and the courts did not reach the merits of the Eighth Amendment
claims. See Nat’l Infusion Ctr. Ass’n v. Becerra, No. 23-CV-707, 2024 WL 561860 (W.D. Tex. Feb. 12, 2024), rev’d
2024 WL 4247856 (5th Cir. Sept. 20, 2024); Dayton Area Chamber of Com. v. Becerra, 696 F. Supp. 3d 440 (S.D.
Ohio Sept. 29, 2023).
130 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *22; see also 26 U.S.C. § 7421.
131 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *21.
132 Id. (citing Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 7 (1962)).
133 Id. at *22 (quoting Bob Jones Univ. v. Simon, 416 U.S. 725, 737 (1974)).
134 Id. at *23.
135 Id. at *22.
136 Id.
137 Id.
138 Id.
139 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *23.
140 Id.
141 Id.
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argument that the Excessive Fines Clause applied only to criminal cases, pointing to both the text
and structure of the Constitution.142
The Nondelegation Doctrine Claim
Article I, Section I of the Constitution, known as the Vesting Clause, states, “All legislative
Powers herein granted shall be vested in a Congress of the United States, which shall consist of a
Senate and House of Representatives.”143 In interpreting these words, the Supreme Court has
recognized what is known as the Nondelegation Doctrine, which is the principle that “Congress
may not transfer . . . ‘powers which are strictly and exclusively legislative’” to another branch of
government.144 Pursuant to Supreme Court precedent, all delegations to federal agencies must,
therefore, be accompanied by an “intelligible principle” that both constrains and guides the
agency in its implementation of the law.145 The trade association plaintiffs argued that the IRA
runs afoul of the Nondelegation Doctrine because “Congress delegated unfettered discretion to
HHS to set prices however it wishes.”146 Similarly, a manufacturer argued, “Congress has
impermissibly delegated sweeping authority to implement price controls without providing a
clear standard to guide the agency’s discretion . . . .”147 The trade association plaintiffs contrasted
the Medicare Drug Price Negotiation Program with other price-setting programs, such as the
regulation of natural gas companies, which the plaintiffs argued are implemented with
satisfactory procedural safeguards, including notice-and-comment rulemaking and the
opportunity for judicial review.148
The plaintiffs specifically argued that the IRA’s delegation of authority to the Secretary lacks an
intelligible principle.149 As an example, they pointed to the factors the Secretary is to consider in
developing the MFP, which they purported “provide[] no guidance whatsoever about how the
142 Id. Boehringer argued that at least two Supreme Court justices would have applied the Excessive Fines clause to a
civil forfeiture, but in determining the manufacturer’s certainty of success on the merits for purposes of the AIA’s
applicability, the court said that “the view of a minority of justices, expressed in dicta in a concurrence, does not
demonstrate a certainty of success.” Id. (citing Tyler v. Hennepin Cnty., 598 U.S. 631, 658–60 (2023) (Gorsuch, J.,
concurring)).
143 U.S. CONST. art. I, § 1.
144 Gundy v. United States, 588 U.S. 128, 135 (2019) (quoting Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 42–43
(1825)). See also Mistretta v. United States, 488 U.S. 361, 371 (1989) (“The nondelegation doctrine is rooted in the
principle of separation of powers that underlies our tripartite system of government.”). For an overview of the
Nondelegation Doctrine, see CONG. RESEARCH SERV., Art. I, S.1.5.1 Overview of Nondelegation Doctrine, Constitution
Annotated, https://constitution.congress.gov/browse/essay/artI-S1-5-1/ALDE_00000014/ (last accessed Sept. 17,
2024). For more information on the Nondelegation Doctrine and its history, see CONG. RESEARCH SERV., Art. I, S.1.5.2
Historical Background on Nondelegation Doctrine, Constitution Annotated,
https://constitution.congress.gov/browse/essay/artI-S1-5-2/ALDE_00000009/ (last accessed Sept. 17, 2024).
145 Mistretta, 488 U.S. at 372 (“Applying this ‘intelligible principle’ test to congressional delegations, our jurisprudence
has been driven by a practical understanding that in our increasingly complex society, replete with ever changing and
more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general
directives.”) Id. In Mistretta, the Court further observed that “no statute can be entirely precise” and that, as a result,
“some judgments involving policy considerations, must be left to the officers executing the law and to the judges
applying it.” Id. at 415. See also J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928) (“If Congress
shall lay down by legislative act an intelligible principle to which the person or body authorized [] is directed to
conform, such legislative action is not a forbidden delegation of legislative power.”).
146 PhRMA Compl. at 31; see also Boehringer Compl. at 6.
147 Boehringer Compl. at 6.
148 Id. referencing 15 U.S.C. §§ 717c, 717r (regulation of natural gas companies); 16 U.S.C. §§ 824d, 824e (regulation
of electric utilities); 39 U.S.C. § 3622 (regulation of mail products).
149 Id. at 30.
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agency should weigh those factors.”150 They argued the program is further unlawful because it
establishes only a ceiling price that the MFP cannot exceed, while simultaneously directing HHS
to “achieve the lowest [MFP] for each selected drug.”151 The plaintiffs described the program as
“unique and unprecedented,” claiming that “[d]espite the IRA’s breathtaking delegation of power
to HHS, the statute lacks both the requisite ‘intelligible principle’ and the constitutional
safeguards necessary to ensure accountability, rationality, and fairness” in price setting.152
Although Congress may not give away its legislative powers, the Supreme Court has recognized
that Congress needs “flexibility and practicality . . . to perform its functions” and that it “may
confer substantial discretion on executive agencies to implement and enforce the laws.”153 As a
result, the Court has generally used the rather lenient intelligible principle test to uphold
delegations.154 The Court has not held a statute unconstitutional on the basis that Congress
impermissibly delegated authority to another branch of government since 1935, when it decided
A.L.A. Schechter Poultry Corp. v. U.S. and Panama Refining Co. v. Ryan.155
The Schechter Poultry and Panama Refining cases arose in the context of the Great Depression
when Congress delegated authority to the executive branch to regulate various economic
activities, including allowing the President to prohibit the interstate transport of excess
petroleum.156 In finding a violation of the Nondelegation Doctrine, the Panama Refining Court
observed, “Congress did not declare in what circumstances that transportation [of petroleum]
should be forbidden . . . . Congress left the matter to the President without standard or rule, to be
dealt with as he pleased.”157 For these reasons, the Court said, even though the President was
acting on behalf of the public interest in hopes of spurring the economy and easing the impact of
150 Id.
151 Chamber of Com. Compl. at 43.
152 Id. at 36.
153 Gundy v. United States, 588 U.S. 128, 135–36 (2019) (Gorsuch, J., dissenting) (plurality opinion) (alteration
omitted) (quoting Yakus v. United States, 321 U.S. 414, 425 (1944)).
154 Although the Nondelegation Doctrine has generally been used to uphold congressional delegations under the
intelligible principle test, Justices Gorsuch, Roberts, and Thomas have indicated that it may be time for the Court to
revisit the doctrine. Id. At least when it comes to delegations that allow for a noncongressional entity to directly restrict
an individual’s liberty, these three Justices seem to call for a new Nondelegation Doctrine standard. See id. at 2134.
Justice Gorsuch remarked, “[I]t’s undeniable that the ‘intelligible principle’ remark [in J.W. Hampton] eventually
began to take on a life of its own. We sometimes chide people for treating judicial opinions as if they were statutes,
divorcing a passing comment from its context, ignoring all that came before and after, and treating an isolated phrase as
if it were controlling. But that seems to be exactly what happened here.” Id. at 163 (footnote omitted).
155 A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) and Pan. Refin. Co. v. Ryan, 293 U.S. 388
(1935). For more information about the history of the Nondelegation Doctrine, see CONG. RESEARCH SERV., Art. I,
S.1.5.3 Origin of Intelligible Principle Standard, Constitution Annotated,
https://constitution.congress.gov/browse/essay/artI-S1-5-3/ALDE_00001317/ (last accessed Sept. 17, 2024). A.L.A.
Schechter Poultry Corp. Schechter, 295 U.S. at 530–31.
156 Schechter, 295 U.S. at 526; Panama Refining, 293 U.S. at 433. The Court distinguished Schechter from Panama
Refining by observing that the issue in Schechter was whether Congress had given adequate definition to the “codes of
fair competition” under the National Industry Recovery Act, such that the President could interpret that term.
Schechter, 295 U.S. at 530–31. Panama Refining, on the other hand, concerned the “range of discretion given to the
President” to prohibit the interstate and foreign commerce transportation of petroleum. Id. at 419. For these reasons, the
Court said, even though the President was acting on behalf of the public interest in hopes of spurring the economy and
easing the impact of the Great Depression, Congress violated the Nondelegation Doctrine by ceding its legislative
function to the executive branch without sufficient guidance. Id. at 430.
157 Panama Refining, 293 U.S. at 419. The Court also observed that “[t]he President was not required to ascertain and
proclaim the conditions prevailing in the industry which made the prohibition [on transporting petroleum] necessary.”
Id. at 418.
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the Great Depression, Congress violated the Nondelegation Doctrine by ceding its legislative
function to the executive branch without sufficient guidance.158
Of the cases that brought Nondelegation Doctrine challenges against the IRA, the U.S. District
Court for the District of New Jersey, in Novo Nordisk, Inc. v. Becerra, is the only court so far to
reach the merits of the issue.159 In that case, the court disagreed with the drug manufacturer’s
argument that the IRA lacked an “intelligible principle,” and the court characterized this standard
as “not demanding.”160 The court reviewed the wording of the IRA to determine whether
Congress had crafted an intelligible principle in it, concluding that its text “provides significantly
much more guidance than [the manufacturer] claim[s]” and “easily passes constitutional
muster.”161 As an example, the court cited the directive that CMS consider certain factors when
determining the MFP, observing, “The IRA conveys a specific, delineated task to CMS, and it
explains the scope and parameters of the delegation throughout the statute.”162
The court also pointed out that the Supreme Court has not found that a statute has violated the
Nondelegation Doctrine since 1935, when the court decided Panama Refining Co. and Schechter,
where Congress did not “‘articulate any policy or standard’” in the statutes at issue.163 The court
compared the IRA to the facts of those cases and found that “it certainly cannot be said that
Congress failed to articulate any intelligible principle in the IRA.”164 Moreover, the court said it
would not “disturb nearly century-long precedent upholding very broad delegations to agencies to
regulate ‘in the public interest’ and to ‘set fair and equitable’ prices” by finding that the IRA
lacked an intelligible principle.165
Finally, the court was not persuaded by the manufacturer’s argument that the IRA violates the
Nondelegation Doctrine because some of CMS’s decisions in implementing the program are not
subject to judicial review.166 The court agreed with the government’s argument that the preclusion
of judicial review “is not related to” the Nondelegation Doctrine.167 Citing a couple of Supreme
Court decisions, the court stated that “courts have consistently considered statutes that preclude
158 The Court observed: “When, therefore, such an administrative agency is required as a condition precedent to an
order, to make a finding of facts, the validity of the order must rest upon the needed finding. If it is lacking, the order is
ineffective.” Id. at 433.
159 In the other cases where plaintiffs challenged the IRA under the Nondelegation Doctrine and/or argued that the IRA
violated the separation of powers, the courts did not reach this issue because the cases were dismissed on procedural
grounds. See Nat’l Infusion Ctr. Ass’n v. Becerra, No. 23-CV-707, 2024 WL 561860 (W.D. Tex. Feb. 12, 2024), rev’d
2024 WL 4247856 (5th Cir. Sept. 20, 2024); Dayton Area Chamber of Com. v. Becerra, 696 F. Supp. 3d 440 (S.D.
Ohio Sept. 29, 2023).
Additionally, in its decision on the parties’ motion for summary judgment, the court in Boehringer Ingelheim observed
in a footnote, “The [company’s] complaint also briefly suggests that the Program constitutes an unconstitutional
delegation of Congress’s authority, but the complaint does not allege this as a distinct claim and none of the parties
raise this issue in their summary judgment briefing. As such, I do not address it.” Boehringer Ingelheim Pharms., 2024
WL 3292657, at *6 n.4.
160 Novo Nordisk v. Becerra, No. 23-20814, 2024 WL 3594413, at *7–8 (D.N.J. July 31, 2024).
161 Id. at *8.
162 Id. (discussing 42 U.S.C. § 1320f-3(e)(1)–(2)).
163 Id. (quoting Mistretta v. United States, 488 U.S. 361, 373 n.7 (1989); see also A.L.A. Schechter Poultry Corp., 295
U.S. 495 (1935); Pan. Refin. Co. v. Ryan, 293 U.S. 388 (1935).
164 Novo Nordisk, 2024 WL 3594413, at *8.
165 Id.
166 Id.
167 Id.
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judicial review and have not indicated that such preclusion violates the nondelegation
doctrine.”168
Spending Clause and Related Claims
Article I, Section 8, Clause 1 of the Constitution, known as the “Spending Clause,” provides,
“The Congress shall have Power To lay and collect Taxes, Duties, Imposts, and Excises, to pay
Debts and provide for the common Defence and general Welfare of the United States.”169 The
pharmaceutical manufacturer plaintiffs argued that Congress’s power under the Spending Clause
cannot justify the IRA’s regulatory scheme.170 First, the plaintiffs asserted that the IRA is not a
valid spending condition, because it does not condition federal Medicare reimbursement on a
manufacturer’s compliance with the terms of the statute.171 Instead, one plaintiff alleged, the IRA
“commands manufacturers to comply and levies monetary penalties for failure to do so.”172
Another plaintiff argued that the IRA “unconstitutionally conditions participation in Medicare” on
its “relinquishment” of its constitutional rights.173
Another manufacturer further alleged that even if Congress created a funding condition in the
IRA, the statute does not provide “clear notice” of the condition.174 According to one plaintiff,
“there is no offer . . . to accept,” and thus the “choice” to comply with the statute and participate
in the Medicare program is “illusory,” because due to the structure of the tax, manufacturers may
gain relief only by completely extricating themselves from Medicare.175 Another manufacturer
claimed the statute is “unconstitutionally coercive because it leverages vast, unrelated benefits to
induce distinct transactions that the Government wants.”176 Another plaintiff argued that because
manufacturers can only “escape” the program by “withdrawing all . . . products from Medicare
and Medicaid—not just the drug selected for the Program,” this amounts to a “gun to the
168 Id. (citing Heckler v. Chaney, 470 U.S. 821 (1985); United States v. Erika, Inc., 456 U.S. 201, 208 (1982); Yale
New Haven Hosp. v. Becerra, 56 F.4th 9 (2d Cir. 2022)).
169 U.S. CONST. art. I, § 8.
170 Bristol Myers Compl. at 24; Merck Compl at 22; Janssen Compl. at 6; Boehringer Compl. at 42.
171 Bristol Myers Compl. at 24–25; Merck Compl. at 21.
172 Bristol Myers Compl. at 24; Merck Compl. at 21. The monetary penalties to which the manufacturers refer are the
law’s excise tax, which is based on a percentage of the selected drug’s total revenue, not just its Medicare revenue. See
26 U.S.C. § 5000D.
173 Boehringer Compl. at 42.
174 See Bristol Myers Compl. at 24 (“Here, the IRA does not set forth conditions on Medicare or Medicaid
reimbursement, or provide for exclusion from those benefit programs if a manufacturer does not cooperate. . . . [The
IRA’s] indirect, convoluted scheme does not ‘unambiguously’ condition a manufacturer’s receipt of federal funding on
its acceptance of the IRA’s mandates.”).
175 Merck Compl. at 21; see also 26 U.S.C. § 5000D(b). The manufacturers point out that in order to withdraw from
participation in these programs, they must, under federal law, give notice of their decision to terminate, and the IRA
“delays [their] ability to terminate . . . for between 11 and 23 months.” Merck Compl. at 24 (citing 42 U.S.C. § 1395w114a(b)(4)(B)(ii)) (regarding the allowable duration of Medicare Coverage Gap Discount Program agreements and a
manufacturer’s right to terminate such an agreement).
In effect, the manufacturers argue that they would have had to withdraw from Medicare and Medicaid by January 2022,
before the IRA was even enacted, to avoid the excise taxes. Bristol Myers Compl. at 24. One plaintiff summarizes the
issue: “In short, once a manufacturer is sucked into the IRA’s vortex of forced below-market sales, it has at its disposal
no evidenced means of escape.” Merck Compl. at 12. In its Revised Guidance, CMS has attempted to resolve this issue
by allowing for an expedited termination of Medicare participation for manufacturers of selected drugs who do not
wish to participate in negotiations. See CMS REVISED GUIDANCE at 120–21.
176 Merck Compl. at 23.
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head.”177Additionally, the plaintiffs stated that the IRA unlawfully conditions receipt of their
Medicare reimbursement payments on the “abandonment of their First and Fifth Amendment
rights,” in violation of the doctrine of unconstitutional conditions.178
The Supreme Court has interpreted the Spending Clause to allow Congress “wide latitude” in
attaching conditions to federal funding while simultaneously recognizing four main constitutional
restrictions on such conditions.179 First, Congress must articulate clear notice of the funding
condition.180 Other limitations that the Court has placed on Congress’s power under the Spending
Clause include whether the condition is related to the underlying purpose of the spending;
whether the condition is unconstitutionally coercive; and whether the condition can be
characterized as an “unconstitutional condition.”181
Although Congress may condition federal funding, “in some circumstances the financial
inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns
into compulsion,’” in violation of federalism principles.182 In NFIB v. Sebelius, the Supreme
Court invalidated a section of the Patient Protection and Affordable Care Act (ACA) that withheld
all federal Medicaid funding from states that did not expand their Medicaid programs in
accordance with the law, at least in part, on the basis that such changes violated the anti-coercion
principle described in South Dakota v. Dole.183 A plurality of the Court characterized the ACA’s
changes to the Medicaid program as “dramatic[],” because if a state opted not to comply with the
statute, it would “lose not merely ‘a relatively small percentage’ of its existing Medicaid funding,
177 Janssen Compl. at 4.
178 Bristol Myers Compl. at 25; Janssen Compl. at 6.
179 South Dakota v. Dole, 483 U.S. 203, 206 (1987) (“Incident to this [spending] power, Congress may attach
conditions on the receipt of federal funds, and has repeatedly employed the power ‘to further broad policy objectives by
conditioning receipt of federal moneys upon compliance by the recipient with federal statutory and administrative
directives.’” (quoting Fullilove v. Klutznick, 448 U.S. 448, 474 (1980)).
180 See generally, CONG. RESEARCH SERVICE, Art. I S.8.C1.2.1 Overview of Spending Clause, Constitution Annotated,
https://constitution.congress.gov/browse/essay/artI-S8-C1-2-1/ALDE_00013356/ (last accessed Sept. 17, 2024); CRS
Report R46827, Funding Conditions: Constitutional Limits on Congress’s Spending Power, by Victoria L. Killion
(2021). In Pennhurst State School and Hospital v. Halderman, for example, the Court observed, “The legitimacy of
Congress’ power to legislate under the spending power thus rests on whether the [s]tate voluntarily and knowingly
accepts the terms of the ‘contract.’” 451 U.S. 1, 13, 17 (1984). The federal statute at issue created “a federal-state grant
program” wherein the federal government provided financial assistance to participating states to create programs to
care for the developmentally disabled. Id. at 1. States’ participation in the program was voluntary; to receive federal
funding, states were required to comply with various provisions in the bill. Id. A resident of Pennhurst State School and
Hospital, a facility that provided care to the developmentally disabled, brought a class action challenging the facility’s
“inhumane” conditions and asserting patients’ rights under the Federal Constitution and the “bill of rights” provisions
of the statute authorizing the grant program. Id. at 2. The Court held that Congress must impose funding conditions
“unambiguously,” so that States could “exercise their choice knowingly, cognizant of the consequences of their
participation,” and that there could be “no knowing acceptance if a State is unaware of the conditions.” Pennhurst, 451
U.S. at 17.
181 South Dakota v. Dole, 483 U.S. 203, 207–08 (1987). For more detailed information about the restrictions the Court
has placed on Congress’s ability to place conditions on the receipt of federal funding, see CONG. RESEARCH SERVICE,
Art. I S.8.C1.2.1 Overview of Spending Clause, Constitution Annotated,
https://constitution.congress.gov/browse/essay/artI-S8-C1-2-1/ALDE_00013356/ (last accessed Sept. 17, 2024); and
CRS Report R46827, Funding Conditions: Constitutional Limits on Congress’s Spending Power, by Victoria L. Killion
(2021). In South Dakota v. Dole, the Court observed “that conditions on federal grants might be illegitimate if they are
unrelated ‘to the federal interest in particular . . . programs.” 483 U.S. 203, 207 (1987) (quoting Massachusetts v.
United States, 435 U.S. 444, 461 (1978) (plurality opinion). For example, the Court found that conditioning the receipt
of federal highway funds on states adopting a minimum drinking age was sufficiently related to the federal interest in
“safe interstate travel.” Id. at 208.
182 Dole, 483 U.S. at 211 (quoting Steward Machine Co. v. Davis, 310 U.S. 548, 590 (1937)).
183 Nat’l Fed. of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012).
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but all of it.”184 The Court reasoned that the Medicaid expansion essentially created a “new
program” and that “Congress is not free to . . . penalize States that choose not to participate in that
new program by taking away their existing Medicaid funding.”185
Congress may condition funds to both governmental recipients (e.g., states or federal agencies)
and nongovernmental recipients (e.g., private businesses).186 Whether each of the Spending
Clause limits discussed above applies to conditions on private entities, however, is unsettled.
Although the Supreme Court has applied the clear notice principle in a case involving a private
funding recipient,187 it has not ruled on whether the relatedness or anti-coercion limitations—
which are rooted in federalism concerns—also apply to conditions on funding to private entities,
such as drug manufacturers.188
Of the cases decided so far, three courts have reached the merits of the manufacturers’ various
Spending Clause-related challenges.189 As part of its conclusion that participation in Medicare is
voluntary, the Boehringer Ingelheim court discussed the plaintiff’s arguments that the IRA was
not a valid exercise of Congress’s power under the Spending Clause.190 In support of its claim, the
drugmaker pointed to the Supreme Court’s decision in NFIB, which held, in part, that Congress
could not condition all of a state’s Medicaid funding on its willingness to comply with various
conditions in the ACA.191 The court distinguished NFIB, though, observing that it concerned the
anti-commandeering doctrine, which is based on the idea that the Constitution does not give
Congress the power to require a state to govern in a certain way.192 The doctrine was “designed to
preserve ‘our system of federalism’ by preventing Congress from interfering with state
governments by placing overly controlling conditions on federal dollars.”193 As result, the
Boehringer Ingelheim court held that “[n]o similar limit” on Congress’ power under the Spending
Clause applied to the IRA, because it regulates private parties, rather than the states.194 The court
184 Id. at 581 (quoting Dole, 483 U.S. at 211). Chief Justice Roberts authored the opinion of the Court, and Justices
Breyer and Kagan joined. Id. at 529.
185 Id. at 587. In addition, the Court has held that Congress may not use its Spending Clause power to “induce the States
to engage in activities that would themselves be unconstitutional.” Dole, 483 U.S. at 210. This principle has come to be
known as the “unconstitutional conditions” doctrine. The Fifth Circuit has described the doctrine as examining “the
extent to which government benefits may be conditioned or distributed in ways that burden constitutional rights or
principles.” Pace v. Bogalusa City Sch. Bd., 403 F.3d 272, 286 (5th Cir. 2005) (en banc). Under this “independent
constitutional bar” principle, for example, a condition that would require states to violate the First Amendment rights of
their citizens would be an unconstitutional spending condition. See supra “First Amendment Claim.”
186 See, e.g., Dole, 482 U.S. 203; Gonzaga Univ. v. Doe, 536 U.S. 273 (2002). The plaintiffs’ complaints do not address
whether the Court’s limitations on constitutional conditions apply equally to private entities and the states.
187 Gonzaga Univ., 536 U.S. 273.
188 See Northport Health Servs. v. HHS, 438 F. Supp. 3d 956, 970–71 (W.D. Ark. 2020) (“No part of the Court’s
decision in NFIB touched on the government’s power to place conditions on private entities. In fact, Courts of Appeals
have held time and time again that the participation of private entities in Medicare and Medicaid is always voluntary,
and providers can avoid regulations to which they object by choosing not to participate in Medicare or Medicaid.”),
aff’d on other grounds, 14 F.4th 856 (8th Cir. 2021). For more information on the distinctions between private and
governmental entities with respect to the constitutional limitations on Congress’s power under the Spending Clause, see
CRS Report R46827, Funding Conditions: Constitutional Limits on Congress’s Spending Power, by Victoria L. Killion
(2021).
189 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *12; Janssen Pharms., 2024 WL 1855054, at *8; Novo
Nordisk, 2024 WL 3594413, at *5; Boehringer Ingelheim Pharms., 2024 WL 3292657, at *15.
190 Boehringer Ingelheim Pharms., 2024 WL 3292657, at *15.
191 Id. (citing NFIB v. Sebelius, 567 U.S. 519, 582 (2012)).
192 Id.
193 Id. (quoting NFIB, 567 U.S. at 577–78).
194 Id.
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concluded, “[t]he federal government is free to use its economic power as a bulk purchaser of
certain goods to negotiate better deals for those goods.”195
In Bristol Myers Squibb and Janssen, the court addressed the manufacturers’ unconstitutional
conditions argument, agreeing with the government that the IRA did not violate the doctrine
because none of the manufacturers’ constitutionally protected rights were “in danger of being
trampled” by voluntarily participating in the Medicare program.196 The court held that the IRA
does not run afoul of First Amendment free speech and it does not violate the Due Process Clause
or constitute a taking under the Fifth Amendment.197 The court declined to substantively analyze
the manufacturers’ claims, holding that, under these circumstances, “the unconstitutional
[conditions] doctrine does not apply.”198
Similarly, the Novo Nordisk court observed that it had “swiftly rejected” the “nearly identical”
unconstitutional conditions doctrine claims before it in the Bristol Myers Squibb and Janssen
decision, because the manufacturers did not show that the IRA violated their First or Fifth
Amendment rights.199 The court in Novo Nordisk “decline[d] to disturb its prior holdings and
applie[d] its reasoning and conclusions to the present action.”200 The court held that because
Medicare participation is voluntary and is not coerced, it “does not infringe on a manufacturer’s
constitutional rights.”201
Concluding Considerations
Many factors influence domestic drug prices, and Congress has continued to express interest in
addressing high prices in a number of potential ways.202 The Congressional Budget Office (CBO)
estimated that the Medicare Drug Price Negotiation Program would lower the federal budget
deficit by $25 billion and that, by 2031, Part D prices would be 8% lower, and Part B prices 9%
lower, as a result of the negotiations.203 In the administration’s most recent estimate, which was
released after CMS announced the MFPs for the first 10 selected drugs, the agency stated that if
the negotiated prices had been used by Medicare in 2023, they “would have saved an estimated
195 Id.
196 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *12 (quoting Oral Argument Transcript at 58:2–4, Janssen
Pharms. v. Becerra et al., Nos. 23-CV-3818, 3335, 14221, 20184 (Argument held Mar. 7, 2024, D.N.J. 2024) (ECF No.
97).
197 Id. at *12. Bristol Myers Squibb did not make an Eighth Amendment argument; however, in Boehringer Ingelheim,
an Eighth Amendment violation was not found, as the court held that it lacked jurisdiction over the manufacturer’s
claim. See supra “Eighth Amendment Claim.”
198 Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *12.
199 Novo Nordisk v. Becerra, No. CV 23-20814, 2024 WL 3594413, at *5 (D.N.J. July 31, 2024) (citing Bristol Myers
Squibb/Janssen, 2024 WL 1855054, at *12). Novo Nordisk, Bristol Myers Squibb, and Janssen were all decided by the
same district court judge.
200 Id.
201 Id.
202 See generally, CRS In Focus IF12272, Selected Issues in Pharmaceutical Drug Pricing, by Jim Hahn et al. (2023).
203 How CBO Estimated the Budgetary Impact of Key Prescription Drug Provisions in the 2022 Reconciliation Act at
5, 19, CONGRESSIONAL BUDGET OFFICE (Feb. 2023), https://www.cbo.gov/system/files/2023-02/58850-IRA-DrugProvs.pdf. See also Michael Erman et al., Bristol Myers, Pfizer, AbbVie Drugs Likely to Face U.S. Price Negotiation,
REUTERS (Mar. 13, 2023), https://www.reuters.com/business/healthcare-pharmaceuticals/bristol-myers-pfizer-abbviedrugs-likely-face-us-price-negotiation-2023-03-13/.
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$6 billion in net covered prescription drug costs,” representing “22% lower net spending in
aggregate.”204
Although the program may result in a deficit reduction, some stakeholders have contended that
the IRA will negatively affect future drug research and development by stifling innovation.205
Some manufacturers have claimed that it will incentivize pharmaceutical companies to delay
research for drugs used to treat smaller patient populations.206 In a September 2022 cost estimate
for the IRA, CBO estimated that “the number of drugs that would be introduced to the U.S.
market would be reduced by about [one] over the 2023-2032 period,” and “about [five] over the
subsequent decade, and about [seven] over the decade after that.”207 It may take years for the U.S.
drug market to realize the full effects of the legislation, as more and more drugs will be subject to
negotiation in the future. For example, CMS selected 10 drugs for negotiation in price year 2026;
CMS will select 15 drugs for each of price years 2027 and 2028; and CMS will select 20 drugs in
2029 and each year thereafter.208 Additionally, for the first two years of the program, CMS will
select only Part D drugs; Part B drugs will not become eligible for negotiation until price year
2028.209
Many of the constitutional claims made in the cases so far turn on whether participation in the
drug negotiation program, and the Medicare program as a whole, is voluntary. As discussed
above, if the manufacturers choose to participate in Medicare, an effect of that choice may be that
one or more of the manufacturers’ drugs will be selected for price negotiation. If participation is
not compulsory, then the manufacturers are not being compelled to sign negotiation agreements
or sell their drugs to Medicare for a lower price. In the summary judgment briefs, the plaintiffs
argued that if they were to stop selling drugs to Medicare, patients would be deprived of
innovative medicines and the manufacturers would lose tremendous profits.210 The courts have
thus far been unpersuaded by such policy arguments, noting the voluminous cases finding
204 CMS, Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026 (Aug.
2024), https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf.
205 Daniel Gilbert, As Drugmakers Slam Medicare Price Controls, Wall Street Shrugs, WASH. POST (Aug. 29, 2023)
https://www.washingtonpost.com/business/2023/08/29/medicare-drug-price-pharma-companiesstock/?utm_campaign=wp_the7&utm_medium=email&utm_source=newsletter&wpisrc=nl_the7. Robert Langreth &
David Gura, Biden Drug Pricing Law Threatens New Products, J&J’s Duato Says, BLOOMBERG LAW (Sept. 11, 2024),
https://news.bloomberglaw.com/product/blaw/bloomberglawnews/exp/eyJpZCI6IjAwMDAwMTkxLWU1OTItZGM0
MC1hM2Y3LWVkYjIzMzAzMDAwNCIsImN0eHQiOiJIUE5XIiwidXVpZCI6IndkQzJVN1J2emVkbFNoUUs3bGI3
anc9PW5Ld2ZUVnA1RVJzNUVmRW4vTlc0clE9PSIsInRpbWUiOiIxNzI2MTM4MzU4MDcyIiwic2lnIjoiNVNXTk
pYL0JOQTZFOHNaVjFoKzJ0VDI3RGlJPSIsInYiOiIxIn0=?source=newsletter&item=readtext®ion=top%20stories%20digest&channel=pharma-and-life-sciences.
For more information on the pharmaceutical industry’s responses to the program, see CRS Report R47872, Medicare
Drug Price Negotiation Under the Inflation Reduction Act: Industry Responses and Potential Effects, by Kevin J.
Hickey, Suzanne M. Kirchhoff, and Hannah-Alise Rogers (2023).
206 Rachel Cohrs, Genentech Weighs Slow-Walking Ovarian Cancer Therapy to Make More Money Under Drug Price
Reform, STAT+ (Aug. 10, 2023), https://www.statnews.com/2023/08/10/genentech-drug-price-cancer/.
207
Summary Estimated Budgetary Effects of Public Law 117-169 at 15, CONGRESSIONAL BUDGET OFFICE (Sept. 7,
2022), https://www.cbo.gov/system/files/2022-09/PL117-169_9-7-22.pdf. CBO stated that “[t]he amounts in this
estimate are in the middle of the distribution of possible outcomes, by CBO’s assessment, and they are subject to
uncertainty.” Id.
208 42 U.S.C. § 1320f-1(a)(1)–(4).
209 Id. § 1320f-1(d)(1)(A).
210 See, e.g., Combined Opposition to Defendants’ Cross-Motion for Summary Judgment and Reply in Support of
Plaintiff’s Motion for Summary Judgment, Janssen Pharms. v. Becerra, No. 23-3818, ECF No. 71 (D.N.J. Nov. 24,
2023), at 2; see also, Combined Opposition to Defendants’ Cross-Motion for Summary Judgment and Reply in Support
of Plaintiff’s Motion for Summary Judgment, Boehringer Ingelheim Pharms. v. HHS, No. 23-1103, ECF No. 92 (D.
Conn. Jan 26, 2024), at 7.
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Medicare participation voluntary, even while acknowledging that the government’s purchases
make up a significant share of the domestic prescription drug market.211
Litigation over the program is ongoing, and the next phase for many of the cases discussed here
will be the appeals that are currently pending in several U.S. Courts of Appeals, which will also
involve the plaintiffs’ APA claims. Additional cases with similar or new allegations may follow.
Some stakeholders have characterized the lawsuits as a “legal crusade” that is being “strategically
designed to reach the U.S. Supreme Court,” while some legal scholars have characterized the
litigation as an “uphill climb[].”212 While the initial attempt to enjoin the program’s
implementation was unsuccessful,213 a future court decision could put implementation of the
negotiated prices on hold or stop CMS from selecting more drugs for negotiation in future years.
The fate of the program may depend in part on how courts resolve the various claims made by the
parties. The outcome of the litigation may have a substantial impact on how effectively CMS will
be able to carry out the program and uphold its stated goals of lowering prescription drug prices
for Medicare and its beneficiaries.
While the litigation proceeds, CMS has attempted to address several stakeholder concerns in its
Revised Guidance; some of the revisions could affect the litigation.214 For example, the guidance
attempted to clarify CMS’s consideration of the negotiation factors for the establishment of the
MFP, which drug manufacturers and others have claimed are overly broad and do not specify the
weight the Secretary will assign to each factor.215
The agency’s Revised Guidance responded to the more than 7,500 comments CMS received after
the release of the Initial Guidance in March 2023.216 Through the Revised Guidance, CMS
advised that it intends to create additional “patient-focused listening sessions” to enable both the
public and drug companies “to engage with CMS during the negotiation process.”217
Similarly, in May 2024, CMS issued additional guidance for price applicability year 2027, which
clarified how the MFPs for price year 2026 will be effectuated.218 The May 2024 guidance also
provided more information about other aspects of the program, including the implementation of
the small biotech exception and how CMS will monitor the bona fide marketing requirement,
which also faces a legal challenge under the APA.219
211 See, e.g., Bristol Myers Squibb/Janssen, 2024 WL 1855054, at *7 (“As an initial matter, the parties have not
identified any authority holding that participation in the Medicare system is involuntary.”); see also Boehringer
Ingelheim Pharms., 2024 WL 3292657, at *12 (discussing caselaw finding Medicare provider participation voluntary).
212 Ian Lopez, Drugmakers Prep Medicare Pricing Suits for March to High Court, BLOOMBERG LAW (Aug. 17, 2023).
213 The U.S. Chamber of Commerce filed a motion for a preliminary injunction to halt implementation of the drug
pricing program while the litigation challenging the program’s constitutionality remained ongoing, but the court denied
this motion in September 2023. Dayton Area Chamber of Com. v. Becerra, 696 F. Supp. 3d 440 (W.D. Ohio Sept. 29,
2023). The court denied the motion after finding that the plaintiffs had not demonstrated that they were likely to
succeed on the merits of their claims and did not face an imminent threat of harm if an injunction were not granted. Id.
at 455, 458.
214 See generally, CMS REVISED GUIDANCE, supra note 8.
215 Id. at 46–50; see also Chamber of Com. Compl. at 37.
216 CMS, CMS Releases Revised Guidance for Historic Medicare Drug Price Negotiation Program, Press Release
(June 29, 2023), https://www.cms.gov/newsroom/press-releases/cms-releases-revised-guidance-historic-medicare-drugprice-negotiation-program.
217 Id.
218 CMS 2027 GUIDANCE, supra note 12 at 110.
219 Id. at 115. For more information on the challenge related to CMS’s bona fide marketing requirement, see CRS Legal
Sidebar LSB11112, Administrative Procedure Act Challenges to CMS’s Implementation of the Medicare Drug Price
Negotiation Program, by Hannah-Alise Rogers (2024).
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Author Information
Hannah-Alise Rogers
Legislative Attorney
Disclaimer
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Congressional Research Service
R47682 · VERSION 5 · UPDATED
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.