The U.S. Chamber of Commerce, the largest lobbying group in the country, is the latest to file suit against the Department of Health and Human Services (HHS) for a new drug-price negotiation program set to go into effect this year.
Pharmaceutical company Merck sued HHS and its secretary, Xavier Becerra, earlier this week. Both allege that the program does not constitute a negotiation, but rather imposes price controls. While the intention of the program is to lower drug prices for Medicare beneficiaries, both Merck and the Chamber of Commerce are claiming a host of constitutional violations.
“Government price controls harm patients, limit access to medicine, and stifle American innovation. Moreover, the new provisions in the Inflation Reduction Act (IRA) violate fundamental protections for free enterprise enshrined in our Constitution, which would have far-reaching implications in the future,” explained the Chamber of Commerce in a statement.
Under the statute, pharmaceutical companies are required to strike a deal that sees their products offered at a 25 to 60 percent discount to Medicare beneficiaries. Should the company refuse that price range, a daily excise tax would be levied that starts at 186 percent and eventually reaches 1,900 percent of the drug’s daily revenues, a ruinous amount. The statute also ties the hands of pharmaceutical companies by requiring that they extricate themselves entirely from the Medicaid and Medicare programs, a huge portion of the market, in order to avoid being subject to the ruinous excise taxes.
The first claim the Chamber of Commerce asserts is a violation of the separation of powers as courts are barred from reviewing HHS’s decisions concerning what prices to offer. “The IRA centralizes vast, unreviewable power in the hands of an administrative agency, without the ordinary protections of due process, to decide the fate of the $600 billion pharmaceutical industry and of every American who relies on it,” reads the filing.
Like Merck, the Chamber of Commerce also asserts claims that the program violates the Fifth Amendment by depriving it of property without compensation and violates the First Amendment by compelling it to describe the process as a negotiation when it does not believe that is the case.
The lobbying group is also claiming the excise taxes are excessive fines under the Eighth Amendment and that there is no legislative authority underpinning the taxes.
“When the government caps prices, it caps innovation and endangers access to better treatments—harming patients the most,” explained the group.
According to the Chamber of Commerce, price controls will force drug companies to shelve new medical treatments. Most drugs that a pharmaceutical company invests in do not get approved or sold but billions are nevertheless spent developing those products. Limiting the profitability of the drugs that are approved and go to market would force companies to make cuts that aren’t beneficial to patients, who could face less access and longer wait times for new treatments.
If the Drug Price Negotiation Program is not enjoined, the first ten drugs that will be subject to the new statute are set to be announced on September 1, 2023 and the pharmaceutical companies will have 30 days to enter into agreements with HHS.