Panel Airs Arguments For and Against Medicare Drug Price Negotiations

The billion-dollar Medicare drug price negotiations program, the statute that created it, and the ongoing litigation that followed were topics at a panel hosted by the Solomon Center for Health Law & Policy⁴ and the Yale Federalist Society on Nov. 19.

When Congress enacted the Inflation Reduction Act in 2022, it adopted a statutory scheme enabling the U.S. Department of Health & Human Services (HHS) for the first time to negotiate the prices of Medicare-covered drugs with the goal of curbing government spending. Not everyone sees this legislative change as a positive development, however. Some pharmaceutical companies filed lawsuits challenging the price-negotiations model. The companies and other opponents of the new legislation argued that the law would constitute a taking and is likely to stifle biomedical innovation.

Solomon Center fellows Alyshia Laidlaw ’26 and Laura Bairett ’26 moderated the panel at Yale Law School. The panelists were Joel McElvain, Acting Deputy General Counsel, Office of the General Counsel of the U.S. Department of Health and Human Services; James (Jim) Stansel ‘97, Executive Vice President and General Counsel, Pharmaceutical Research and Manufactures of America (PhRMA); and Michael F. Cannon, Director of Health Policy Studies of the Cato Institute.

The event kicked off with remarks from McElvain, who gave an overview of the Inflation Reduction Act’s goals and where it stands now.

Stansel then provided the pharmaceutical companies’ perspective. The companies’ claims rest on three grounds, he said: separation of powers and the nondelegation doctrine, the Fifth Amendment (procedural due process), and the Eighth Amendment’s Excessive Fines Clause. According to these claims, as summarized by Stansel, Congress did not tell the Centers for Medicare & Medicaid Services, the agency that administers those programs, how to balance the factors in making determinations regarding the price negotiations. In addition, he continued, the Inflation Reduction Act’s drug-negotiations framework does not include a notice and comment process. He also argued that the law precludes judicial review of decisions made by  the Centers for Medicare & Medicaid Services. 

Next, McElvain gave the perspective of the Department of Health and Human Services. The department disagrees that the new drug price negotiations framework would constitute a taking or violate due process, he said. McElvain explained that participation in the program is voluntary, emphasizing that manufacturers have a choice to participate in negotiations. 

Cannon noted that the Cato Institute, for which he serves as the Director of Health Policy Studies, is siding with Health and Human Services because the department’s approach would reduce government’s spending. Cannon added that, from his perspective, the pharmaceutical companies’ claims that the program stifles innovation are unfounded. He explained that beyond an optimal point, the benefits of innovation may be marginal but the costs are very high. 

“There is such a thing as too much innovation,” Cannon said.

The event concluded with questions and answers about voluntary negotiations, generic drugs, and the implications of the upcoming administration changes.