While other federal agencies that purchase pharmaceutical products negotiate with manufacturers to determine the prices they pay, in 2003, Congress created a sweetheart deal for the pharmaceutical industry when it prevented Medicare from negotiating prices. This essentially allowed the pharmaceutical industry to name its price when selling drugs to Medicare.

In 2022, with the cost of prescription drugs on the rise, Congress revoked this deal in the Inflation Reduction Act, creating a drug pricing negotiation program for the ten most common and expensive prescription drugs covered by Medicare. Under the negotiation program, CMS determines an initial price offer, then refines it through information supplied by the manufacturer. The manufacturer can then accept the offer or take one of three options: it can continue selling its product through Medicare at the old price and pay an excise tax, it can stop offering its portfolio of products to Medicare and Medicaid, or it can transfer its interests in the drug selected for negotiation to another manufacturer and continue selling the rest of its portfolio to Medicare and Medicaid at prices of its choosing. In short, the drug manufacturers can no longer unilaterally name a price that the government must accept.

In 2024, the government announced that it had reached negotiated prices for all ten drugs, which will result in billions of dollars in savings. However, drug manufacturers across the country, including Boehringer Ingelheim, sued the federal government. Boehringer Ingelheim claimed that the program was forcing it to sell its products to the government in violation of the Fifth Amendment’s Takings Clause. The District of Connecticut held that the program was voluntary and therefore could not be an unconstitutional taking, and Boehringer Ingelheim appealed to the Second Circuit. In January 2025, CAC filed an amicus brief in the Second Circuit in support of the government, explaining why the drug manufacturer’s Takings Clause claim is unsupported by constitutional text and history.

As originally understood, the Takings Clause only applied to the direct appropriation of physical property. Initially drafted to prevent the kinds of lawless requisitioning of property that was widespread in the Continental Army during the American Revolution, it was also motivated by the Framers’ concern that the people would seize land from the wealthy landowning class. The Framers of the Clause, including its drafter James Madison, understood that the Clause would have a limited scope, applying only to the actual seizure of property, not any regulation that affects a property’s worth. As Justice Scalia once wrote, “early constitutional theorists did not believe the Takings Clause embraced regulations of property at all.”

Beginning in the late nineteenth century, the Supreme Court somewhat expanded the scope of the Clause, but even in those cases, it continued to limit it to the functional equivalent of the involuntary physical appropriations of property. Moreover, even as the Court held that some regulatory programs can run afoul of the Clause, it made clear that regulatory programs can only constitute a taking if they compel participation. In other words, a taking must be involuntary.

Boehringer Ingelheim’s argument that the program is an unconstitutional taking is wrong. To start, the program is not a physical taking because it does not authorize the physical taking of a single pill. The drug manufacturers in these cases retain full legal rights over all their pharmaceutical products, and they remain free to sell any of their products to any other buyers in the world, at any price, in any quantity. The program simply allows Medicare to play a role in deciding what prices it is willing to pay. Boehringer Ingelheim claims that its participation in the program is not truly voluntary because of the excise tax, but it will be subject to the excise tax only if it refuses to negotiate, but still chooses to reap the benefits of participating in Medicare and Medicaid. And even then, the excise tax will be only on the Medicare sales of the selected drug. Boehringer Ingelheim also argues that because Medicare and Medicaid cover a large share of its potential customer base, any choice about whether to participate in the program is illusory. But the fact that it might not like the choice does not make it any less a choice.

Quite simply, the Constitution does not entitle drug manufacturers to maintain their bottom line by dictating the prices Medicare must pay.