 inversecondemnation.com When government enters the pharmaceutical market as a participant, it naturally changes the dynamics. But when Congress does this, is it a taking?
Medicare Part D is a voluntary prescription drug benefit program for Medicare beneficiaries. When Congress first created Part D in 2003, it barred the Centers for Medicare and Medicaid Services (“CMS”) from using its market share to negotiate lower prices for the drugs it covers. But Congress changed course when it enacted the Inflation Reduction Act of 2022 (the “IRA”). The IRA includes a Drug Price Negotiation Program (the “Program”) that directs CMS to negotiate prices over a subset of covered drugs that lack a generic competitor and represent the highest expenditures to the government.
In Bristol Myers Squibb Co. v. U.S. Dep't of Health & Human Svcs., No. 24-1820 (Sep. 4, 2025), the U.S. Court of Appeals for the Third Circuit held no, it isn't.
The court first rejected the pharma company plaintiffs' physical takings argument, which asserted that the Program "permits the government to physically appropriate their drugs without paying just compensation." Slip op. at 19. The court held no, this isn't an involuntary expropriation but rather a program in which the companies voluntarily participate. Thus, if the companies don't like the prices demanded by the government they "are free to stop doing business with the government." Slip op. at 20. The can opt out, and "[t]his opt-out option defeats the Companies' argument that they were forced to sign contracts under the Program." Slip op. at 21.
The court also concluded that the unconstitutional conditions doctrine (Nollan-Dolan) did not render the companies' participation in the Program involuntary, because this isn't a land use exaction, and the N-D principles are not applicable when the government leverages its power to coerce the companies into the Program. Yes, the federal government is the 800-pound gorilla, but that doesn't change the fact that you don't have to do business with it:
The federal government, by virtue of its size, possesses a sizable market share in many of the markets it enters. In certain markets—for example, for military hardware that is unlawful for civilians to own—the government may be the only purchaser. Economic factors may have a strong influence on a company’s choice to do business with the government, but a company that chooses to do so still acts voluntarily.
Slip op. at 24-25.
The court also rejected separation of powers and free speech arguments. But you can read those on your own.
Bristol Myers Squibb Co. v. U.S. Dep't of Health & Human Svcs., No. 24-1820 (3d Cir. Sep. 4, 2025)
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