The Inflation Reduction Act’s highly politicized, misleadingly named, “Drug Price Negotiation Program” is a form of government-imposed price control. Under the Program, the Centers for Medicare & Medicaid Services selects certain “negotiation-eligible” brand-name drugs. Following a supposed “negotiation” and “agreement” with its manufacturer, each such drug can be sold within the enormous Medicare/Medicaid system only at a sharply discounted, government-dictated, “maximum fair price.”
Bristol Myers Squibb Co. & Janssen Pharmaceuticals, Inc.—research-oriented companies that developed two such innovative, widely used drugs, Eliquis® and Xarelto®—filed suits in New Jersey federal district court challenging the constitutionality of the Program. They contend that the Program violates the Fifth Amendment by taking their property (i.e., their pharmaceutical products) without payment of just compensation, and violates their First Amendment right to freedom of speech by compelling them to express the government’s viewpoint and messaging about the Program’s supposed nature and virtues.
The district court granted summary judgment to the government and dismissed the case, in part on the theory that the companies’ participation in Medicare/Medicaid (which encompasses more than 140 million individuals) and the Drug Price Negotiation Program is voluntary. The companies have appealed to the U.S. Court of Appeals for the Third Circuit.
ALF has filed an amicus brief supporting the pharmaceutical companies and urging the court of appeals to reverse the district court.
Whether the Inflation Reduction Act’s Drug Price Negotiation Program, 42 U.S.C. § 1320f et seq., violates the Fifth Amendment’s Takings/Just Compensation Clause and/or the First Amendment’s Free Speech Clause
ALF’s Amicus Brief:
ALF’s amicus brief addresses the “unconstitutional conditions doctrine.” This well-established principle prevents the government from coercing individuals or corporations into relinquishing their constitutional rights (e.g., the right to just compensation for a taking of their property or their right to freedom of speech) in return for receiving a governmental benefit (e.g., eligibility to sell pharmaceuticals within the Medicare/Medicaid system). Oblivious to reality, the district court held that pharmaceutical companies’ participation in Medicare/Medicaid is voluntary, and from this fictional premise, concluded that their constitutional claims lack merit, and thus, that the unconstitutional conditions doctrine does not apply. Citing scholarly discussions, ALF’s brief explains why the unconstitutional conditions doctrine applies even if participation in a governmental program is voluntary, and certainly where, as in this case, participation as a practical matter is obligatory.
ALF’s brief also explains why the price slashing mandated by the Program harms the public interest. This is because the Program diminishes the financial resources that research-oriented companies need to reinvest in proprietary new drug research and development.
Developing and commercializing a new prescription drug—including the formidable and time-consuming challenge of obtaining Food and Drug Administration approval—is an extraordinarily costly and financially risky process. Myopically focusing on prices alone fails to take into account the bigger picture—the often insurmountable financial, scientific, regulatory, and/or commercial hurdles that a new drug, even one that shows promise during early testing—must overcome before it can be made available to the public.
