Court rejects PhRMA’s challenge to Medicare drug price negotiations

The U.S. Court of Appeals for the Fifth Circuit affirmed a lower court’s ruling in favor of HHS and CMS on Aug. 26, upholding the Medicare Drug Price Negotiation Program against a constitutional challenge from PhRMA, the National Infusion Center Association and the Global Colon Cancer Association.

Here are four things to know:

1. The plaintiffs made three arguments against the program: that Congress gave federal health officials too much unchecked power to set drug prices, that the tax penalty for not negotiating amounts to an unconstitutional punishment, and that the process violates manufacturers’ rights to fair treatment. The Fifth Circuit rejected all three arguments, upholding a lower court’s 2025 ruling in favor of the government.

2. On due process, Judge Leslie Southwick wrote that manufacturers have no protected property interest in selling to Medicare beneficiaries at a preferred price because participation in Medicare — and by extension the negotiation program — is voluntary. The court also found providers and patients lack the kind of protected interests the plaintiffs claimed were violated.

3. The panel found the Inflation Reduction Act’s excise tax on manufacturers that decline to negotiate does not qualify as an excessive fine under the Eighth Amendment, since the tax has no connection to criminal conduct and instead stems from a manufacturer’s lawful business choices.

4. This marks the latest loss for the pharmaceutical industry’s yearslong legal campaign against the program. Every circuit court to rule on the merits has sided with the government, including the Supreme Court’s decision in May to leave the negotiations in place and the 6th Circuit’s rejection of a separate challenge from the U.S. Chamber of Commerce last August. 

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