The Supreme Court on Monday rejected appeals from pharmaceutical companies challenging the federal government’s authority to negotiate prices for high-cost drugs in Medicare, clearing the last major legal hurdle for a policy that allows direct government bargaining with drugmakers over prices in the program covering more than 65 million older and disabled Americans.
The justices did not comment in leaving in place rulings from the federal appeals court in Philadelphia that dismissed the drug manufacturers’ claims. The 3rd U.S. Circuit Court of Appeals had upheld the program’s constitutionality, rejecting arguments that the negotiation requirement violated due process and constituted an unlawful government taking of private property.
MSI previously reported that the appeals court had dismissed the manufacturers’ claims, setting up the Supreme Court challenge that has now concluded.
The negotiation program was created as part of the 2022 Inflation Reduction Act, which capped years of debate over whether the federal government should be allowed to haggle directly with pharmaceutical companies over the prices of drugs in Medicare. The law required the government to negotiate prices for certain high-cost drugs in the federal insurance program on an annual basis, with the first deals going into effect in 2026.
Not a single Republican voted for the legislation, which was signed by Democratic President Joe Biden. Republicans have been harshly critical of aspects of the law, though the Trump administration has continued implementing the Medicare price negotiation program. Republican President Donald Trump has separately rolled back programs favoring alternative energy sources that were also included in the Inflation Reduction Act.
The pharmaceutical companies that brought the challenge had argued that the negotiation program amounted to an unconstitutional government taking and that the mandatory participation requirement violated their due process rights. The appeals court rejected those arguments, finding that Medicare is a voluntary program and that drugmakers who choose to participate in the market must accept the conditions Congress attached.
The court’s action Monday means the program will proceed under the framework established by the 2022 law. The first round of negotiated prices, covering 10 high-cost drugs selected by the Centers for Medicare & Medicaid Services, is scheduled to take effect in 2026. Additional drugs are to be added in subsequent years.
The case had been closely watched by the health care industry, which has long opposed direct government price negotiation in Medicare. The Congressional Budget Office has estimated the program will save the federal government tens of billions of dollars over the next decade.