Third Circuit Endorses Biden’s Medicare Price Negotiation Program

Third Circuit Upholds Medicare Drug Price Negotiation Program

In a landmark decision, the U.S. Court of Appeals for the Third Circuit has ruled in favor of a Medicare Drug Price Negotiation Program through the Inflation Reduction Act (IRA). Despite objections from Bristol Myers Squibb (BMS) and Janssen Pharmaceuticals, who claimed that the program violated their constitutional rights, the majority of judges sided with the U.S. government, maintaining that the companies could choose not to participate if they disagreed with the prices. However, Judge Thomas Hardiman expressed a dissenting opinion.

The Inflation Reduction Act, implemented in 2022, was designed to decrease the federal budget deficit while also reducing prescription drug costs for eligible patients. Despite the intentions, the program has been met with strong opposition from pharmaceutical companies and intellectual property (IP) advocates.

BMS and Janssen’s Arguments Against the IRA

BMS and Janssen challenged the IRA in the U.S. District Court for the District of New Jersey by alleging it violated their property rights, compelled non-consensual speech, and imposed unconstitutional conditions. BMS has publicly stated that they believe the IRA forces them to provide Medicare access to their top-selling medicines at large discounts, which they claim equates to an unconstitutional taking of their property. They also contend that the program infringes on their First Amendment rights by compelling them to voice the government’s political messages. The imposition of financial penalties on companies that fail to comply, argue BMS and other pharma entities, demonstrates the coercive nature of the IRA and its disregard for their constitutional rights.

Government’s Defense of the Program

The Department of Justice (DOJ) under both the Trump and Biden administrations has defended the Negotiation Program. In a brief filed in February, the DOJ stated the program doesn’t infringe upon physical property rights as it neither physically takes plaintiff’s drugs nor forces their sale. Rather, they argue, the government simply offers to purchase drugs under conditions that plaintiffs are not legally obligated to accept.

Third Circuit’s Ruling: No Physical Taking

The Third Circuit agreed with the DOJ. They found that the government’s program does not constitute a physical taking because it allows the government to negotiate the purchase of the companies’ drugs without mandating that they accept the offer. The majority of judges also concluded that economic hardship does not equate to legal compulsion. However, industry experts have argued that opting out of the program is unfeasible due to the impact it would have on the 157 million Americans who rely on Medicare for their medications.

Contention Around First Amendment Violation and Unconstitutional Conditions

The Third Circuit also dismissed the companies’ arguments regarding First Amendment violation and the imposition of unconstitutional conditions. The court found that the Program regulates conduct but only incidentally affects speech and participation remains voluntary. Furthermore, the court ruled that any compulsion to speak does not extend beyond the Program’s boundaries.

Dissenting Opinion

Judge Hardiman dissented from the majority’s ruling, contending that the Program, which imposes significant tax liabilities on companies that choose not to participate, violates company property rights under the Fifth Amendment.

Responses to the Ruling

In response to the Third Circuit’s ruling, Patients for Affordable Drugs (P4AD), an organization that filed an amicus brief in the case, released a statement celebrating the decision. They noted that this marks the 13th ruling in favor of Medicare negotiation, which is set to benefit 9 million Medicare recipients by 2026 and is supported by 80% of Americans.

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