Medicare Drug Price Negotiations: A Look at the Constitutional Challenges

As Medicare prepares to use its new authority to negotiate for lower prices on certain costly prescription drugs, several trade associations and drug manufacturers have initiated a series of lawsuits seeking to block the negotiations.

Aiming to make health care more affordable for Americans, Congress authorized Medicare to engage in drug price negotiations under the federal Inflation Reduction Act of 2022 (IRA). Companies have until Sunday, Oct. 1, to choose whether to participate in the program, but the U.S. Chamber of Commerce has sought a preliminary injunction to prevent its members from initiating the negotiation process during ongoing litigation and has urged a federal judge to issue a ruling before that Oct. 1 deadline.

The Chamber’s lawsuit challenges the legality of the IRA’s Medicare Drug Price Negotiation Program, asserting that the program is unconstitutional for multiple reasons.

First Amendment Claim

The Chamber argues that the IRA violates the First Amendment, which protects freedom of speech. It claims the IRA requires drug manufacturers to engage in “compelled speech” by forcing them to agree to prices set by the government as fair.

Fifth Amendment Claims

The Chamber also contends that the IRA violates the due process clause of the Fifth Amendment. It argues the IRA does not offer necessary procedural safeguards such as notice and the chance for a hearing and judicial review.

Other lawsuits argue that the IRA violates the takings clause of the Fifth Amendment. They claim the program is an unconstitutional taking of property, forcing companies to provide access to drugs at substantially reduced prices without fair compensation.

Eighth Amendment Claim

The Chamber also asserts that the IRA’s excise tax — a tax levied on drug manufacturers that do not comply with certain deadlines and other requirements — is essentially a punitive measure, violating the excessive fines clause of the Eighth Amendment.

Nondelegation Doctrine Claim

Several of the lawsuits claim the IRA violates the nondelegation doctrine, giving undue power to the U.S. Department of Health and Human Services Secretary in setting drug prices without Congress establishing a clear legal framework that delineates the boundaries and constraints of the authority granted.

Spending Clause Claim

Some lawsuits maintain that leveraging Congress’ spending clause power to enforce the IRA is unconstitutional, arguing that it conditions the ability of drug manufacturers to participate in Medicare on relinquishment of constitutional rights such as due process or free speech.

The administration disputes these constitutional arguments, emphasizing that participation in the program is voluntary. The administration also asserts the Chamber lacks standing, the right to make a legal claim or seek judicial enforcement. Additionally, the administration argues the case is not yet ripe for review, noting that drug manufacturers could not incur financial harm until the negotiated prices take effect in 2026.

While the Chamber awaits a decision on its request for a preliminary injunction, the remaining lawsuits are likely months away from initial rulings. If circuit courts issue conflicting decisions, the Supreme Court may ultimately decide the legality of allowing Medicare to negotiate drug prices.