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Drug price controls unconstitutional, business groups say

Ohio and Michigan chambers of commerce argue Congress gave federal regulators power to set, not negotiate, drug prices in federal spending bill.

(CN) — The U.S. Chamber of Commerce and chambers of commerce in Ohio and Michigan sued the federal government Friday, claiming a provision in the 2022 Inflation Reduction Act aimed at holding down the prices of prescription drugs is unconstitutional.

Plaintiffs Chamber of Commerce of the United States, Dayton Area Chamber of Commerce, Ohio Chamber of Commerce and Michigan Chamber of Commerce argue the price-control provision of the IRA that effectively gives the U.S. Department of Health and Human Services the power to set the price of prescription drugs purchased for Medicare and Medicaid recipients violates separation of powers and the plaintiffs’ constitutional due process rights.

The chambers of commerce say they have standing to sue because each has members who will be directly affected by the drug price controls.

The drug pricing provision of the IRA gives the Department of Health and Human Services the power to negotiate prices of drugs purchased for Medicare and Medicaid recipients, but the lawsuit claims the term “negotiate” is misleading because the government has the power to set the price and drug companies have little choice but to comply, or face punitive “excise tax” penalties.

“The IRA’s euphemistic references to the manufacturer’s ‘agreement’ and the parties’ ‘negotiations’ are matched by the IRA’s imposition of a misleadingly named ‘excise tax’ to force manufacturers to ‘agree’ to whatever the Secretary dictates,” the plaintiffs state in the complaint. “The IRA is ostensibly intended to reduce prescription drug prices. But if a manufacturer refuses to ‘agree’ to whatever HHS decides is the ‘maximum fair price,’ the manufacturer is hit with an ‘excise tax’ penalty of up to 19 times the daily gross sales of the drug — all U.S. sales, not just sales in connection with government healthcare programs."

This, the plaintiffs state, is “no tax; it is more like an ax” because the exorbitant penalty is, in reality, an ultimatum to pharmaceutical companies.

The chamber groups argue that the public has an interest in protecting incentives that drive innovation and development of new cures and treatments for diseases and serious health conditions. “Those incentives depend on a market-based system for financing research and development,” according to the complaint.

The plaintiffs argue that Congress wrongly delegated unchecked power to the Health and Human Services secretary to set a price with no legal standard, the department avoided ordinary rulemaking procedures and Congress sought to bar judicial review of many key decisions to be made by the agency in implementing the legislation.

“This unprecedented regime of price controls and forced sales flouts bedrock principles of separation of powers and nondelegation, exceeds Congress’s enumerated powers, denies pharmaceutical manufacturers due process of law, imposes excessive fines, and compels speech in violation of the First Amendment,” the complaint states.

The Department of Health and Human Services did not immediately respond to a request for comment from Courthouse News Service Friday evening.

The complaint filed in the U.S. District Court for the Southern District of Ohio asks the court to declare the drug pricing scheme unconstitutional and enjoin its enforcement. Among the parties named in the complaint are Health and Human Services Secretary Xavier Becerra and Chiquita Brooks-Lasure, administrator of the Centers for Medicare and Medicaid Services.

The lead attorney on the complaint is Gregory Ruehlmann of King & Spalding in Atlanta.

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Categories / Business, Consumers, Health

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