By: Julie Chung

On Tuesday, August 29, 2023, the United States Department of Health and Human Services (“HHS”) announced that it selected ten drugs to negotiate under Medicare Part D.[1] Medicare Part D is the government’s prescription drug coverage plan, and the ten drugs included are Eliquis, Entresto, Enbrel, Fiasp, Farxiga, Imbruvica, Januvia, NovoLog, Stelara, and Xarelto.[2] The Biden administration received its authority to negotiate Medicare drug prices from the Inflation Reduction Act.[3]

The Inflation Reduction Act permits the HHS Secretary to select drugs to publish in a list, negotiate prices for the listed drugs, and enter into agreements with the drug manufacturers.[4] The selected drugs must be high-cost, “single source drugs without generic or biosimilar competition.”[5] The act aims to make health care more affordable and accessible for millions of Americans.[6] President Biden maintains negotiation plan matters because Big Pharma charges more to Americans relative to what they charge internationally.[7]

Big Pharma is retaliating against the Inflation Reduction Act.[8] There are currently over six lawsuits from drug companies litigating against the Inflation Reduction Act’s drug price negotiations.[9] Drug companies argue that the government violates their constitutional rights due to the 5th Amendment Takings Clause.[10]  “A taking is when the government seizes private property for public use.”[11] The 5th Amendment Takings Clause mandates that the government should adequately give “just compensation” to a private property owner when the government takes their private property for public use.[12]

Specifically, in Novartis Pharmaceuticals Corporation v. Becerra et al., Novartis, a pharmaceutical corporation, claims that HHS is forcing them surrender their private property to Medicare Part D beneficiaries at below-market prices.[13] The company argues that the government pushes below-market prices by requiring drug companies to provide Medicare Part D beneficiaries with access to its drugs for prices that the government mandates.[14] The companies contend that the government’s mandate fails to offer drug companies “just compensation” and thus violates the 5thAmendment Takings Clause.[15] These lawsuits are a common trend where drug companies claim extortion from the government due to unfair drug prices.[16]

However, it is unlikely that a court will find that the Inflation Reduction Act violates the Takings Clause of the 5thAmendment.[17] Because these drug companies have the autonomy to decide whether to opt in or opt out of participating in Medicare and Medicaid programs, the Inflation Reduction Act does not violate a drug company’s constitutional rights.[18] The Biden administration also announced that drug companies can choose to leave negotiations if they so choose immediately.[19] The goal of negotiation is to have “just compensation” so that the government can pay a reasonable price for American families to access low-cost healthcare.[20]

Although Big Pharma may lose its battles against President Biden’s Inflation Reduction Act, the fight towards affordability in the American healthcare system still has a long way to go. Medicare Part D does not include most pharmaceutical drugs in the marketplace, and domestic healthcare costs are still skyrocketing. With Big Pharma’s litigation efforts stalling progress, the future appears bleak for legislative attempts to make healthcare affordable. Nonetheless, it is up to voters, the local and federal policymakers, and cooperation with the pharmaceutical business to continue fighting for reasonably priced health care, as lives are at stake.

[1] See Press Release, U.S. Dep’t of Health and Hum. Serv., HHS Selects the First Drugs for Medicare Drug Price Negotiation, (Aug. 29, 2023) (https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html).

[2] What Medicare Part D Drug Plans Cover, Medicare.gov, https://www.medicare.gov/drug-coverage-part-d (last visited Sept. 9, 2023); Zachary B. Wolf, A major development in the fight against prescription drug costs, CNN Politics(Aug. 29, 2023), https://www.cnn.com/2023/08/29/politics/medicare-drug-costs-what-matters/index.html.

[3] See Department of Health and Human Services, supra note 1 (stating the Inflation Reduction Act intends to lower health care costs); Tami Luhby, These are the first 10 drugs subject to Medicare price negotiations, CNN Politics (Aug. 29, 2023, 3:32 PM), https://www.cnn.com/2023/08/29/politics/medicare-drug-price-negotiations/index.html.

[4] See Inflation Reduction Act Research Series: Medicare Enrollees’ Use and Out-of-Pocket Expenditures for Drugs Selected for Negotiation under the Medicare Drug Price Negotiation Program, APSE (Aug. 29, 2023), https://aspe.hhs.gov/reports/aspe-ira-drug-negotiation-fact-sheet#:~:text=The%20Inflation%20Reduction%20Act%20(IRA,without%20generic%20or%20biosimilar%20competition.

[5] See id.

[6] See FACT SHEET: One Year In, President Biden’s Inflation Reduction Act is Driving Historic Climate Action and Investing in America to Create Good Paying Jobs and Reduce Costs, The White House (Aug. 16, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/16/fact-sheet-one-year-in-president-bidens-inflation-reduction-act-is-driving-historic-climate-action-and-investing-in-america-to-create-good-paying-jobs-and-reduce-costs/#:~:text=The%20Inflation%20Reduction%20Act%20is,making%20the%20tax%20code%20fairer.

[7] See Luhby, supra note 4 (explaining negotiation matters and will lower premiums for Medicare enrollees).

[8] See id. (noting pharmaceutical companies are filing lawsuits against the Biden Administration).

[9] Inflation Reduction Act, O’Neill Inst., https://litigationtracker.law.georgetown.edu/issues/inflation-reduction-act/ (last visited Sept. 9, 2023).

[10] See Luhby, supra note 4 (noting drug companies filing many suits claiming violation of the 5th Amendment Takings Clause and 8th Amendment Excessive Bail Clause).

[11] Takings, Cornell L. Legal Info. Insti., https://www.law.cornell.edu/wex/takings (last visited Sep. 9, 2023).

[12] Id.

[13] Complaint at 8, Novartis Pharm. Corp. v. Becerra et al., (No. 23-14221) (D.N.J. filed Sept. 1, 2023).

[14] See id.

[15] See id.

[16] Nicholas Bagley, The Real Reason Drugs Cost So Much — and Do Too Little, Politico (Aug. 29, 2023, 10:11AM), https://www.politico.com/news/magazine/2023/08/27/medicare-drug-price-value-00111346 (explaining Merck, a pharmaceutical company, calls the program “tantamount to extortion.”).

[17] Id.

[18] Id.

[19] Id.

[20] See Press Release, supra note 1 (explaining increased availability and low-cost drug prescriptions due to the negotiation plan).