The Constitution does not allow drugmakers to enter into a sweetheart deal

Faced with skyrocketing prescription drug prices, nearly a fifth of seniors report skipping, delaying, underusing or borrowing prescription medications due to concerns about their cost, according to a 2022 survey. It’s no wonder that more than four-fifths of Americans support Medicare’s ability to negotiate prescription drug prices. But on Oct. 30, drugmakers will ask the U.S. Third Circuit Court of Appeals to block the prescription drug price negotiation program in their lawsuit against the secretary of the Department of Health and of Social Services, Xavier Becerra. They argue that the Constitution gives them the right to set their price and force the government to pay it. Indefinitely.

As part of the Inflation Reduction Act (IRA), Congress created a drug price negotiation program for ten of the most common and expensive drugs, ensuring that drug manufacturers can no longer force Medicare to accept their prices. The results have already been impressive: The government recently announced that it had achieved prices that would save Medicare about $6 billion a year, and those taxpayer savings will only increase as more medications will be added each year. The negotiation program aligns Medicare with other federal programs, allowing the government to negotiate with drug manufacturers, such as the Veterans Affairs National Formulary.

Drug manufacturers have brought various constitutional challenges to Medicare’s drug price negotiation program, but perhaps the most unusual was their claims under the Takings Clause. The Revenue Clause provides that private property shall not “be used for public use, without just compensation.” This often occurs in the context of eminent domain, when the government takes property such as farmland or homes to free up space for roads and other infrastructure projects. Yet the Revenue Clause has recently become the go-to argument for businesses claiming they have a constitutional right to avoid regulation that hurts their bottom line.

The path forward for the courts is clear: They should consider these allegations regarding the Takings Clause to be at odds with the text and history of the Constitution.

The authors strictly limited the takings clause to the seizure of physical property. Even as the Supreme Court expanded the scope of the clause, it continued to limit it to situations that function as an involuntary physical expropriation of property. There is no hold here under these precedents, let alone the text and history of the Constitution.

To begin with, there is no physical capture: the drug price negotiation program does not “take” a single pill from drug manufacturers. This only allows the government, like any other customer, to decide what it is willing to spend. Nothing in the revenue clause guarantees companies the right to set a profit level themselves. And federal law does not require drugmakers to accept the price proposed by the government; instead, it imposes a negotiation in which both parties have a say in the final price.

Drugmakers say it’s nonetheless a catch because, they say, they have no choice but to negotiate. But the program gives them ways out if they don’t like the negotiated price. They can choose to continue selling their drug at their preferred price if they pay a tax on sales of that drug. They can also stop selling their drugs to Medicare altogether. They can also arrange to transfer their interest in the selected drug to another manufacturer so that they can continue to sell the remainder of their portfolio to Medicare while opting out of the negotiation program.

Drug makers don’t like any of these choices, but a choice they don’t like is not a violation of the Constitution. As a Delaware judge observed: “How is any of this involuntary? You are free to do whatever you want. You may not make as much money, but you are free.

What the drugmakers lack, in this case, in constitutional support, they make up for in boldness. Contrary to the evidence, they claim that price negotiations will force them to stop research into innovative drugs. Bristol Myers Squibb argued in district court that price negotiation would create a “dystopian” scenario in which they would be unable to develop “future life-saving treatments in areas such as cancer, Alzheimer’s disease and other diseases.” immunological and cardiovascular.

A good cure for the cancer we have here, they say. It would be a shame if something happened to him. Never mind that Bristol CEO Myers Squibb promised on an earnings conference call that the company was “confident in our ability to manage the impact of the IRA.”

Drug manufacturers are free to dislike prescription drug price negotiation programs. If they think it’s a bad idea, they know how to make their voices heard: The pharmaceutical industry spent a record $372 million on federal lobbying in 2022. However, the Constitution does not allow manufacturers of drugs to maintain their results by indefinitely dictating the prices paid by Medicare. Courts should reject these attempts to expand the Takings Clause beyond the scope dictated by the text and history of the Constitution.