“The Program cannot qualify as a physical taking under the Takings Clause because it does not ‘compel the surrender’ of property, or impose any ‘physical invasion or restraint upon’ it, and the owner ‘retain(s) the rights to possess, donate, and devise’ the property,’ said the government brief.”
The U.S. government filed its brief in opposition yesterday to Janssen Pharmaceuticals and Bristol Myers Squibb Company’s (BMS) petition for writ of certiorari challenging the government’s Medicare Drug Price Negotiation Program.
A split U.S. Court of Appeals for the Third Circuit decision in September 2025 affirmed a grant of summary judgment to the government that the imposition of the Program via the Inflation Reduction Act (IRA) does not violate the companies’ constitutional rights.
The underlying case was brought by BMS and Janssen in the U.S. District Court for the District of New Jersey. On appeal, the plaintiffs argued that the IRA: “1) effects an uncompensated taking of their property, (2) compels speech in violation of the First Amendment, and (3) imposes unconstitutional conditions on participation.”
The IRA, enacted in 2022, was designed as a way to reduce the federal budget deficit while simultaneously lowering prescription drug prices for eligible patients. While some celebrated the bill, pharmaceutical companies and IP advocates have been strongly opposed. The Trump Department of Justice (DOJ), in a rare demonstration of agreement with a Biden-era position, has decided to carry the Biden Administration’s position forward.
The Third Circuit held that the companies were “incorrect” that the government’s Program amounts to a physical taking “because it permits the government to physically appropriate their drugs without paying just compensation.” Since the Program is based on a negotiation process, it is voluntary, said the majority. “If the Companies dislike the prices the government is willing to pay, they are free to stop doing business with the government.” Judge Thomas Hardiman dissented.
But the pharmaceutical industry has argued that the IRA essentially disguises a mandatory price control regime as a negotiation process that has no voluntary nature due to statutory difficulties for drug manufacturers attempting to leave the Medicare program, as well as a tax penalty on non-cooperating drug companies up to 1900% of daily drug sales.
In their petition to the Supreme Court filed in December 2025, the companies argued that “(i)n true negotiations, parties can walk away from the bargaining table without reaching agreement. Yet as Judge Hardiman observed in dissent, the Program makes manufacturers ‘an offer (they can’t) refuse’ ‘by threatening them with unavoidable, enterprise-crippling tax liabilities’ if they do not ‘agree’ to turn over their drugs at below-market prices…. No voluntary program operates in that way.”
But the government countered yesterday that the petitions do not warrant review because drug manufacturers who do not want to participate in the Program have “several options.” The Program cannot qualify as a physical taking under the Takings Clause because it does not “‘compel the surrender’ of property, or impose any ‘physical invasion or restraint upon’ it, and the owner ‘retain(s) the rights to possess, donate, and devise’ the property,” said the government brief.
The companies’ “compelled speech” arguments fail for similar reasons, argued the brief, namely, that there is no compulsion to engage in speech via the Manufacturer Agreements if the Program is voluntary. And as to the companies’ argument that the Negotiation Program is unconstitutionally coercive under National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (NFIB) and violates the unconstitutional conditions doctrine, the brief explained that “before and after NFIB, courts have uniformly rejected the idea that the lucrative nature of Medicare and Medicaid coerces private parties.”
The government ultimately said that the Court’s review of the petitions would be premature in any case, in part because “two other courts of appeals are poised to consider challenges to the Negotiation Program. See Teva Pharm., USA, Inc. v. KennedyNo. 25-113, 2025 WL 3240267 (D.D.C. Nov. 20, 2025), appeal pending, No. 25-5425 (D.C. Cir. argument scheduled for May 5, 2026); National Infusion Ctrs. Ass’n v. Kennedy798 F. Supp. 3d 748, 765-769 (W.D. Tex. 2025), appeal pending, No. 25-50661 (5th Cir. argued Oct. 7, 2025). The brief added:
“If those courts of appeals were to deem the Negotiation Program unconstitutional, this Court could consider addressing those cases at a later juncture. And if the government continues to prevail across courts of appeals, there will continue to be no need for this Court’s intervention.”
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