Enacted in August 2022, the Inflation Reduction Act (IRA) contains several reforms designed to lower the high cost of prescription drugs and make them more accessible to patients, including seniors enrolled in Medicare. One such reform is the IRA’s drug price negotiation program, which provides a pathway to lower the extremely high prices for “single-source drugs” for which no generic equivalent is currently on the market. The program relies on a process in which the Department of Health and Human Services (HHS), which is responsible for implementing Medicare, and the manufacturer of selected drugs negotiate the prices at which drugs will be made available to Medicare providers and drug plans.
Merck filed suit challenging the IRA program, alleging that the program violates the Takings Clause and the First Amendment. After Merck moved for summary judgment, Public Citizen, joined by Patients for Affordable Drugs Now, Doctors for America, Protect Our Care, and Families USA, filed an amicus brief in support of the government’s opposition. The amicus brief explains that high prescription drug prices force many Medicare enrollees, including seniors, to cut back on other necessary expenses or forgo medications that they cannot afford, risking adverse health effects and premature death. In addition, our brief explains that Merck’s Takings Clause claim is based on the notion that the price that Merck chooses to charge for a drug is necessarily the drug’s “fair market” price. Drug companies, however, set prices for brand-name prescription drugs under monopolistic conditions, and the sales prices charged are not necessarily “fair market” prices. Indeed, drug companies charge different amounts to different buyers. Because Merck’s Takings Clause argument claim fails to take into account the dynamics that inform pricing in the market for brand-name prescription drugs, Merck’s assertion that the price negotiated under the IRA program results in an unconstitutional taking fails.