Which Price is Right: The Constitutionality of Lowering Drug Prices

In 2021, 32.5% of US adults younger than 65 with diagnosed diabetes reported insulin rationing, 20% of which reported doing so because of cost. Insulin rationing is a dangerous practice in which diabetics cut back on their insulin use because they can’t afford their prescribed dosage. The price of prescription drugs has long been an issue in America and only recently has there been any initiative to put a price cap on pharmaceutical drugs. The 340B Drug Pricing Program allows eligible healthcare organizations to purchase prescription drugs at a discount from pharmaceutical manufacturers, which helps hospitals care for low-income patients and communities. Since 2023, the Secretary of the Department of Health and Human Services, Xavier Becerra, has been negotiating prices directly with participating manufacturers for single-source Medicare drugs without generic competition, or any drugs that are the only treatment for a specific condition, through the 340B Drug Pricing Program. In response to this attempt to lower drug prices, numerous pharmaceutical companies and lobbying groups have gone to court claiming these negotiations are unconstitutional. While some of these cases are ongoing, a couple have been decided in favor of the US Department of Health and Human Services, creating an important precedent for the future of the pharmaceutical industry in America and the accessibility of life-saving medicine.

 In many of the cases, big pharma companies are alleging a violation of the due process clause in the Fifth Amendment, Eighth Amendment, and the Administrative Procedure Act and the Appointments Clause of the Constitution. In Boehringer Ingelheim Pharmaceuticals v. U.S Department of Health and Human Services et al, Boehringer Ingelheim Pharmaceuticals argues that Congress has impermissibly delegated sweeping authority to a federal agency to implement price controls without providing a clear standard. Boehringer argues that without a clear standard the agency’s discretion to safeguard the public and private interests is at stake, thereby violating the Due Process Clause of the Fifth Amendment. Boehringer argues that the 340B Drug Pricing Program seeks to reinforce its appropriation of manufacturers’ property by backing those demands with grossly excessive fines, in violation of the Eighth Amendment. The Eighth Amendment protects citizens from excessive bail, fines, and cruel and unusual punishment. Boehringer argues that the fines imposed on Boehringer Pharmaceuticals are excessive and not proportionate to the claims of appropriating property. Comparatively, in Astrazeneca Pharmaceuticals LP v. Becerra et al, Astrazeneca Pharmaceuticals argues that the ceiling prices that would be enforced by 340B violate the Administrative Procedure Act (APA) because it was issued without following proper procedure and is in excess of previous statutory authority. The argument that 340B does not follow APA regulations would allow all companies that are undergoing drug pricing negotiations to challenge the reduced prices in court and potentially get rid of the reduction because of the alleged misconduct in the negotiations.

Both of the aforementioned cases have been appealed or put on hold indefinitely; however, in Boehringer Ingelheim Pharmaceuticals v. U.S Department of Health and Human Services et al the presiding judge originally decided in favor of the defendant, the US Department of Health and Human Services. Based on this intial ruling, the court's interpretation is that the IRA drug pricing negotiations are not unconstitutional. The Eighth Amendment was not violated as the fines imposed upon companies for inappropriate patents were deemed proportional. This ruling establishes that as long as the fines are in accordance with the crime, in this context being the now illegal excessive profit made of incorrectly patented drugs, the fines are not deemed excessive. The court ruled that the Due Process Clause of the Fifth Amendment was not violated as there was ample basis for the 340B Drug Pricing Program in the law, and, therefore, its enactment isn’t a violation of previous law. Consequently, the Administrative Procedure Act has not been violated, as there exists a clear previous statutory authority that the federal government is building on with the 340B Program.

This previously existing statute is the Robinson-Patman Act of 1939. The Robinson-Patman Act (RPA) is an antitrust federal law intending to prohibit price discrimination. The act explicitly prohibits sellers from offering different prices to different customers for similar goods and services. The act’s original intent was to protect small businesses from larger competitors that could use their purchasing power to get better prices. However, this statute can be applied to the ongoing drug negotiations between the Department of Health and Human Services and pharmaceutical companies. In the 1994 case “In Re Brand Name Prescription Drug Antitrust Lititgation”, a group of pharmacies filed a class-action lawsuit against drug manufacturers for offering upfront discounts to health plans, hospitals, and other purchasers, while denying the same discounts to pharmacies and thereby customers for the same drugs. This lawsuit led to significant changes in the pharmaceutical industry, with manufacturers shifting towards offering rebates, or partial refunds, to health plans after the sale rather than upfront discounts. The RPA has gone largely unenforced by the Federal Trade Commission and Department Of Justice, which has led to many companies, pharmaceutical, and others, engaging in price discrimination without consequence. By beginning to enforce the RPA consistently, the government has set a clear precedent for price-capping and other measures to stop companies from creating excessive price margins at the expense of their customers.

According to the precedent set by the RPA and the legal interpretation of the Fifth and Eighth Amendments, the 340B Drug Pricing Program is constitutional. The decisions that upheld the constitutionality of the 340B Program are crucial to checking the power of pharmaceutical companies and ensuring that people from all backgrounds can get the treatments they need. Regardless of the ongoing fights in court, the Biden-Harris administration has reached an agreement for lower prices for 54 drugs. These negotiated drugs are some of the most expensive and most frequently dispensed drugs in the Medicare program and are used to treat conditions such as heart disease, diabetes, and cancer. The new prices will go into effect for people with Medicare Part D prescription drug coverage beginning January 1, 2026. These negotiated prices range from 38 to 79 percent discounts off of list prices. About nine million people with Medicare use at least one of the drugs selected for negotiation. People with Medicare prescription drug coverage are expected to see aggregated estimated savings of $1.5 billion in their out-of-pocket costs in 2026. These lower drug prices will save lives by making necessary prescriptions more affordable and accessible to the average American. As we move into President Trump’s second term, the decisions made by the appeals court in Boehringer Ingelheim Pharmaceuticals v. U.S Department of Health and Human Services et al regarding the constitutionality of the drug-price negotiations will help to safeguard these reductions in drug prices. The ongoing cases will play a vital role in ensuring that the negotiations and price reductions are not eased or repealed to help big pharma.

Edited by Alexa Goldfarb