The United States spends more on healthcare than any other country.[1] In 2021, health spending per person in the United States was nearly twice that of the next highest country.[2] A significant driver of health spending in the United States is the astronomical price of pharmaceutical drugs.[3] On average, prescription drug prices are 2.56 times higher in the United States than in other high-income nations.[4]
Historically, pharmaceutical companies, providers, and insurers have negotiated drug prices behind closed doors. In August of 2022, Congress passed the Inflation Reduction Act (the “Act”), which includes the Medicare Drug Price Negotiation Program (the “Program”), enabling Medicare to negotiate prescription drug prices for the first time.[5]
The Department of Health and Human Services (“HHS”) maintains that the Program will increase the affordability of prescription drugs for both Medicare recipients and the government.[6] The Secretary of HHS, Xavier Becerra, stated, “For far too long, pharmaceutical companies have made record profits while American families were saddled with record prices . . . .”[7] In addition to consumer savings, the government is expected to save nearly $100 billion over the next decade as a result of Medicare negotiations.[8]
Pharmaceutical companies and their advocates are fighting back. Various drug manufacturers and industry groups have filed lawsuits seeking to halt the Program.[9]
Pharmaceutical companies maintain that capping drug prices will cut into their profits, discouraging investment in new drug development.[10] Robert Zirkelbach, an executive vice president at PhRMA, stated, “You can’t take hundreds of billions of dollars out of the pharmaceutical industry and not expect that it’s going to have a real impact on the industry’s ability to develop new treatments and cures for patients.”[11] The industry warns that ultimately consumers are harmed by having fewer options and fewer life-saving treatments.[12]
Manufacturers also worry about the effect Medicare’s public pricing could have on private sector profits. Injecting transparency into drug pricing could serve as leverage to buyers in the private market.[13] Alternatively, manufacturers could shift costs to private insurers.[14] The Program’s impact on drug manufacturers’ profits and private insurers’ costs remains uncertain.
The Claims
The lawsuits filed by drug manufacturers and industry groups present various legal theories.[15] Lawrence Gostin, a law professor at Georgetown University, commented that the drug industry “is throwing the kitchen sink at the government.”[16]
Merck’s arguments focus on the Fifth Amendment’s Takings Clause and the First Amendment’s compelled-speech doctrine.[17] Other drug manufacturers rely on similar claims.[18]
The Takings Clause of the Fifth Amendment to the U.S. Constitution states that “private property” cannot be taken for public use without “just compensation.”[19] Merck argues that the drug constitutes private property.[20] Additionally, Merck argues, pharmaceutical drugs are “doubly protected” because they are patented.[21] Merck claims that the Act “costumes these seizures as ‘sales’ by forcing manufacturers to accept Government-dictated payments that represent a fraction of the drugs’ fair value.”[22] Lastly, if Merck fails to agree to sell at the negotiated price, Merck incurs “crippling penalties,” measured as a percentage of the drug’s daily revenues.[23] In short, Merck asserts that they must “surrender their patented drugs” for public use.[24]
Merck also relies on the First Amendment’s compelled-speech doctrine.[25] The compelled-speech doctrine bars the government from forcing individuals or businesses to express certain messages against their will.[26] Merck argues that the program “operates through a façade of ‘negotiations’ and ‘agreements’ that require manufacturers to convey that they ‘agree’ to HHS’s ‘fair’ prices.”[27] Merck maintains that HHS’s prices are not the product of voluntary agreements but instead amount to “extortion.”[28]
The Chamber of Commerce presents a few different arguments.[29] One argument is based on the separation of powers.[30] The Chamber of Commerce relies on the nondelegation doctrine, asserting that the Program lacks an intelligible principle, giving the Executive “unchecked power.”[31] Another argument relies on the Fifth Amendment’s Due Process Clause.[32] The Due Process Clause prohibits the government from taking a person’s property without notice and an opportunity to be heard.[33] Among other Due Process claims, the Chamber of Commerce maintains that Congress does not provide for judicial review of key decisions, including the opportunity to challenge the determined price.[34] The Chamber of Commerce relies on various other legal theories, including the Eighth Amendment’s Excessive Fines Clause and Article One’s enumerated powers.[35]
The lawsuits have been filed in federal courts around the country.[36] This might increase the likelihood of conflicting rulings, paving the path for review by the Supreme Court.
For now, the fate of the Program is uncertain. Only time will tell.
[1] Munira Gunja et al., U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes, (Jan. 31, 2023), https://www.commonwealthfund.org/publications/issue-briefs/2023/jan/us-health-care-global-perspective-2022.
[2] Id.
[3] Andrew Mulcahy et al., International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies, RAND Corporation (2021), https://www.rand.org/pubs/research_reports/RR2956.html.
[4] Id.
[5] HHS Selects the First Drugs for Medicare Drug Price Negotiation, U.S. Department of Health and Human Services (Aug. 29, 2023), https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html.
[6] Id.
[7] Id.
[8] Juliette Cubanski et al., Explaining the Prescription Drug Provisions in the Inflation Reduction Act, KKF (Jan. 24, 2023), https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/.
[9] Sheryl Gay Stolberg & Rebecca Robbins, Drugmakers Are ‘Throwing the Kitchen Sink’ to Halt Medicare Price Negotiations, N.Y. Times (July 25, 2023), https://www.nytimes.com/2023/07/23/us/politics/medicare-drug-price-negotiations-lawsuits.html.
[10] Merck & Co. v. Becerra, No. 1:23-cv-01615, at 1-2 (D.D.C. filed June 6, 2023); ; Janssen Pharmaceuticals, Inc. v. Becerra, No. 3:23-cv-03818, at 2-3 (D.N.J. filed July 18, 2023).
[11] Stolberg & Robbins, supra note 9.
[12] Merck & Co. v. Becerra, No. 1:23-cv-01615, at 1-2 (D.D.C. filed June 6, 2023); Bristol Myers Squibb Co. v. Becerra, No. 3:23-cv-03335, at 4-5 (D.N.J. filed June 16, 2023); Janssen Pharmaceuticals, Inc. v. Becerra, No. 3:23-cv-03818, at 2-3 (D.N.J. filed July 18, 2023).
[13] Robert King & David Lim, Will drug price negotiations work? Here’s what you need to know., Politico (Aug. 29, 2023, 8:00 AM), https://www.politico.com/news/2023/08/28/what-to-know-medicare-drug-price-negotiations-00113081.
[14] Id.
[15] Merck & Co. v. Becerra, No. 1:23-cv-01615 (D.D.C. filed June 6, 2023); Janssen Pharmaceuticals, Inc. v. Becerra, No. 3:23-cv-03818 (D.N.J. filed July 18, 2023); Bristol Myers Squibb Co. v. Becerra, No. 3:23-cv-03335 (D.N.J. filed June 16, 2023); Dayton Area Chamber of Commerce v. Becerra, No. 3:23-cv-00156 (S.D. Ohio filed June 9, 2023).
[16] Stolberg & Robbins, supra note 9.
[17] Merck & Co. v. Becerra, No. 1:23-cv-01615 (D.D.C. filed June 6, 2023).
[18] Janssen Pharmaceuticals, Inc. v. Becerra, No. 3:23-cv-03818 (D.N.J. filed July 18, 2023); Bristol Myers Squibb Co. v. Becerra, No. 3:23-cv-03335 (D.N.J. filed June 16, 2023).
[19] U.S. Const. amend. V.
[20] Merck & Co. v. Becerra, No. 1:23-cv-01615, at 15 (D.D.C. filed June 6, 2023).
[21] Id. at 16.
[22] Id. at 2.
[23] Id.
[24] Id. at 16.
[25] Id. at 3.
[26] Compelled Speech: Overview, Legal Information Institute, Cornell Law School, https://www.law.cornell.edu/constitution-conan/amendment-1/compelled-speech-overview (last visited Oct. 14, 2023).
[27] Merck & Co. v. Becerra, No. 1:23-cv-01615, at 3 (D.D.C. filed June 6, 2023).
[28] Id. at 3.
[29] Dayton Area Chamber of Commerce v. Becerra, No. 3:23-cv-00156 (S.D. Ohio filed June 9, 2023).
[30] Id. at 33.
[31] Id. at 39.
[32] Id. at 40.
[33] U.S. Const. amend. V.
[34] Dayton Area Chamber of Commerce v. Becerra, No. 3:23-cv-00156 (S.D. Ohio filed June 9, 2023).
[35] Id.
[36] Merck & Co. v. Becerra, No. 1:23-cv-01615 (D.D.C. filed June 6, 2023); Janssen Pharmaceuticals, Inc. v. Becerra, No. 3:23-cv-03818 (D.N.J. filed July 18, 2023); Dayton Area Chamber of Commerce v. Becerra, No. 3:23-cv-00156 (S.D. Ohio filed June 9, 2023).
