Corporate Accountability

Bristol Myers Squibb v. Becerra and Janssen v. Becerra

In Bristol Myers Squibb v. Becerra and Janssen v. Becerra, the District of New Jersey is considering whether the Inflation Reduction Act’s Medicare drug price negotiation program amounts to an unconstitutional taking of their property.

Case Summary

While other federal agencies that purchase pharmaceutical products negotiate with manufacturers to determine the prices they pay, in 2003, Congress created a sweetheart deal for the pharmaceutical industry when it prevented Medicare from negotiating prices. This essentially allowed the pharmaceutical industry to name its price when selling drugs to Medicare.

In 2022, with the cost of prescription drugs on the rise, Congress revoked this deal in the Inflation Reduction Act, creating a drug pricing negotiation program for the ten most common and expensive drugs covered by Medicare. Under the negotiation program, CMS determines an initial price offer, then refines it through information supplied by the manufacturer. The manufacturer can then accept the offer or take one of three options: it can continue selling its product through Medicare at the old price and pay an excise tax, it can stop offering its portfolio of products to Medicare and Medicaid, or it can transfer its interests in the drug selected for negotiation to another manufacturer and continue selling the rest of its portfolio to Medicare and Medicaid at prices of its choosing. In short, the drug manufacturers can no longer unilaterally name a price that the government must accept.

Ten drugs were selected for the first round of negotiations, and negotiations will be finalized by 2026. Drug manufacturers across the country have sued the federal government over the program, including Janssen Pharmaceuticals and Bristol Myers Squibb in the District of New Jersey.

The Constitutional Accountability Center filed an amicus brief in support of the government, explaining that the drug manufacturers’ interpretation of the Takings Clause is at odds with constitutional text and history, as well as Supreme Court precedent.

As originally understood, the Takings Clause only applied to the direct appropriation of physical property. Initially drafted to prevent the kinds of lawless requisitioning of property that was widespread in the Continental Army during the American Revolution, it was also motivated by the Framers’ concern that the people would seize land from the wealthy landowning class. The Framers of the Clause, including its drafter James Madison, understood that the Clause would have a limited scope, applying only to the actual seizure of property, not any regulation that affects a property’s worth. As Justice Scalia once wrote, “early constitutional theorists did not believe the Takings Clause embraced regulations of property at all.”

Beginning in the late nineteenth century, the Supreme Court somewhat expanded the scope of the Clause, but even in those cases, it continued to limit it to the functional equivalent of the involuntary physical appropriations of property. The regulation had to act as a “complete destruction of rights” of the property owner, specifically, the “bundle of rights” to “possess, use and dispose of” one’s property, as well as the right to exclude trespassers from real property. Moreover, even as the Court held that some regulatory programs can run afoul of the Clause, it has made clear that regulatory programs can only constitute a taking if they compel participation.  In other words, a taking must be involuntary.

Plaintiffs argue that the drug negotiation program is an unconstitutional taking in violation of the Takings Clause, but our brief explains why this is wrong. To start, the Program is not a physical taking because it does not authorize the physical taking of a single pill. The drug manufacturers in these cases retain full legal rights over all pharmaceutical products in their custody, and they remain free to sell any of their products within the commercial insurance market, and to any other buyers in the world, at any price, in any quantity. The drug negotiation program simply allows Medicare to play a role in deciding what prices it is willing to pay. Plaintiffs claim that their participation is not truly voluntary because of the excise tax, but Plaintiffs will be subject to the excise tax only if they refuse to negotiate but still choose to reap the benefits of participating in Medicare and Medicaid. And even then, the excise tax will be only on the Medicare sales of the selected drug. They also argue that because Medicare and Medicaid cover a large share of their potential customer base, any choice about whether to participate in the Program is illusory. But the fact that plaintiffs may not like the choice does not make it any less a choice.

Quite simply, the Constitution does not entitle Plaintiffs to maintain their bottom line by dictating the prices Medicare must pay.

Case Timeline

  • October 24, 2023

    CAC files amicus brief in the District Court of New Jersey

    CAC Becerra Amicus Brief
  • March 7, 2024

    The District Court of New Jersey will hear oral arguments

More from Corporate Accountability

Corporate Accountability
U.S. Court of Appeals for the Fifth Circuit

National Association of Private Fund Managers v. Securities and Exchange Commission

In National Association of Private Fund Managers v. Securities and Exchange Commission, the Fifth Circuit is determining whether Congress granted the SEC the authority to regulate private fund advisers.
Corporate Accountability
U.S. Supreme Court

Cantero v. Bank of America

In Cantero v. Bank of America, the Supreme Court is considering whether a state law protecting New York homeowners is preempted by the federal National Banking Act.
Corporate Accountability
December 5, 2023

RELEASE: Supreme Court Oral Argument Shows Conservative Attempt to Limit Congress’s Taxing Power is Misguided

WASHINGTON, DC – Following oral argument at the Supreme Court this morning in Moore v....
By: Brian R. Frazelle
Corporate Accountability
U.S. Supreme Court

Moore v. United States

In Moore v. United States, the Supreme Court is considering a challenge to Congress’s power to tax income under the Sixteenth Amendment.
Corporate Accountability
September 28, 2023

Lopsided Success for Corporate Interests: The New Normal Under the Supreme Court’s Conservative Supermajority (2022-2023 Term)

Every year, the Supreme Court moves the needle further and further in favor of industry.
By: Brian R. Frazelle
Corporate Accountability
June 30, 2023

RELEASE: Chamber of Commerce Has Another Remarkably Successful Term Advancing Its Positions Before the Supreme Court, Constitutional Accountability Center Finds

WASHINGTON, DC – The 2022-2023 Supreme Court Term has just concluded, and the U.S. Chamber...
By: Brian R. Frazelle