Reported / Citable
Background
The Inflation Reduction Act of 2022 created a program under which the Department of Health and Human Services, acting through the Centers for Medicare and Medicaid Services, selects certain high-expenditure Medicare drugs and negotiates a “maximum fair price” with their manufacturers. The statute specifies eligibility rules, negotiation procedures, ceiling prices, and factors the agency must consider. Manufacturers that decline to negotiate may face an escalating excise tax on sales of the selected drug reimbursed by Medicare, while manufacturers may leave the program by transferring the drug or withdrawing from Medicare and Medicaid.
The National Infusion Center Association, the Global Colon Cancer Association, and Pharmaceutical Research and Manufacturers of America brought a facial constitutional challenge alleging that the program violated the nondelegation doctrine, the Eighth Amendment’s Excessive Fines Clause, and the Fifth Amendment’s Due Process Clause. After an earlier Fifth Circuit decision established jurisdiction and standing, the district court granted summary judgment to the government on remand. The plaintiffs appealed.
The Court’s Holding
The Fifth Circuit affirmed. It held that Congress supplied an intelligible principle governing HHS’s authority by defining the program’s policy, procedures, price ceilings, and mandatory considerations. The statutory requirement that prices be fair in light of specified factors also imposed a price floor. Neither the limits on judicial review nor the temporary absence of notice-and-comment rulemaking transformed that otherwise valid delegation into an unconstitutional one.
The court disagreed with the district court’s conclusion that the Anti-Injunction Act barred the Excessive Fines claim. Because the excise tax could impose extraordinary liability during a refund suit, the court held that a postpayment action was not a meaningful alternative remedy and that the plaintiffs could pursue their constitutional challenge. The claim nevertheless failed on the merits because the tax applies to lawful commercial choices and lacks the connection to criminal or quasi-criminal conduct needed to constitute a “fine” under the Eighth Amendment.
The due-process claims also failed because the program implicated no protected property or liberty interest. Manufacturers have no entitlement to sell drugs through Medicare at their preferred prices, and participation in Medicare and Medicaid remains voluntary. Providers are entitled only to reimbursement at rates established by law, not to prior or preferred rates, and the plaintiffs did not establish that patients possess a constitutionally protected right to continued access to particular prescription drugs.
Key Takeaways
- The IRA’s detailed eligibility rules, negotiation procedures, pricing limits, and mandatory factors provide an intelligible principle sufficient under the nondelegation doctrine.
- The Anti-Injunction Act did not bar the Excessive Fines challenge because the excise tax’s potentially unaffordable accumulation made a postpayment refund suit an inadequate alternative remedy.
- The excise tax is not an Eighth Amendment fine, and manufacturers, providers, and patients lack the asserted protected interests necessary for the plaintiffs’ due-process claims.
Why It Matters
The decision sustains the Medicare drug-price negotiation program against three major constitutional challenges while clarifying that the program’s excise tax may be challenged before payment when no practical alternative judicial remedy exists. The ruling therefore preserves constitutional review of the tax even though the challengers lost on the merits.
The opinion also aligns the Fifth Circuit with other appellate courts in concluding that drug manufacturers have no constitutional entitlement to preferred prices in a voluntary federal reimbursement program.