AYESHA RASCOE, HOST:
It's been just a few days since the Department of Health and Human Services announced the first 10 drugs that Medicare will directly negotiate prices for. But in courts across the country, pharmaceutical groups are already suing the Biden administration, trying to invalidate the new program. Nicholas Bagley specializes in health law at the University of Michigan. Previously, he was chief counsel to Governor Gretchen Whitmer, Democrat of Michigan. Welcome to the show.
NICHOLAS BAGLEY: I'm happy to be here. Thanks for having me.
RASCOE: This push to negotiate cheaper drug prices - like, remind us, why is the government able to do this and why is this only happening now? People might have thought they would have been able to do this before.
BAGLEY: Yeah, well, remember - cast your mind back about 20 years - Medicare actually didn't originally cover prescription drugs at all. And prescription drugs were added to Medicare as a benefit only in 2003. And as part of that price for getting that coverage over the finish line, Republican legislators insisted that Medicare not have the authority to individually negotiate the prices for drugs. Negotiations would instead be handled by individual prescription drug plans that people would enroll in. And there were a lot of concerns that this was, you know, leaving Medicare's bargaining power to one side and essentially kneecapping the federal government and trying to get a good price for taxpayers for these drugs.
RASCOE: So about these lawsuits that are going on now, about how many lawsuits are there and who's driving them?
BAGLEY: There are eight of them as of now. And they're primarily driven by the pharmaceutical companies whose drugs have been identified for negotiation. So these are companies that are saying, look, we would prefer to keep selling our drugs at the prices that we've, you know, sold them for in the past. We don't want to enter into these price negotiations. And we believe that the law requiring us to do so - effectively, requiring us to do so - is unconstitutional.
RASCOE: Well, what's the argument?
BAGLEY: They're making a bunch of different kinds of constitutional claims. It's - you know, I call it throwing constitutional spaghetti at the wall to see what sticks. But the core of their argument is that it's Medicare demanding that drug manufacturers reduce their prices. It's actually not a negotiation. It's a set of price controls. And they say those price controls violate their rights in a couple of different ways. They say that the prices are going to be so low that they effectively take their drugs without just compensation. And that's prohibited under the Fifth Amendment of the Constitution.
They also say that they're forced to go into these things that are called negotiations. And they say, well, we don't think these are really negotiations at all. We're being coerced, and we don't think these prices are going to be fair. And so therefore, you're compelling us to make statements that we think are untrue. There are other constitutional claims too, but those are the ones that appear in all of the lawsuits and the ones that have gotten the most attention so far.
RASCOE: Is there a case to be made that this is the government, that maybe you don't have a lot of recourse or that it's not a fair negotiation?
BAGLEY: Yeah, from the drug companies' perspective, this is going to feel like a lot of pressure. Because in order to avoid the lower prices for their drugs, they're going to have to withdraw from the Medicare and Medicaid program altogether. In other words, what Medicare is saying is, listen, if you want to sell us one of your drugs, we're going to insist on what we think is a fair price. And if you don't like it, you have to walk away altogether. And there's a lot of money coming from Medicare and Medicaid into drug companies' pockets, and they're going to think twice before stepping away. And so that from their perspective, it sure feels like coercion in the sense that they don't feel like they have a choice.
But - and this is really an important point - just because the Medicare and Medicaid programs are so lucrative, it doesn't mean that the drug manufacturers are being coerced into participating. So for them to say that this is somehow a price control and that they're somehow bereft of any free choice, well, that's a consequence of just how lavishly we spend for prescription drugs. It doesn't count as coercion. It certainly doesn't count coercion under the law.
RASCOE: With all of this legal wrangling, though, it seems like this is the sort of thing that might end up at the Supreme Court. Is the government on solid legal ground? Or could the Supreme Court strike this down the way they struck down, say the Biden plan to discharge federal student loan debt for millions of Americans?
BAGLEY: It's a good question. And certainly, the drug manufacturers are hoping to take this case up to the Supreme Court. I should also add that, you know, like the Biden administration's student loan relief program, that was an executive branch action. And when the executive branch moves to implement federal law, those decisions are often subject to pretty intensive court scrutiny. In this case, the drug companies are challenging the constitutionality of an act of Congress. Those are much harder to win. Could the Supreme Court accept the drug manufacturers' invitation to work a pretty radical change in the law? It's possible. I don't see any reason to think that's likely. You know, this isn't a massive push to change the law coming from all organs of the Republican Party political establishment. This is a bunch of drug companies that are upset about Medicare price negotiation. And to be honest, the position they're pushing is not popular among Democrats or Republicans.
RASCOE: That's Nicholas Bagley, law professor at the University of Michigan. Thank you so much for joining us.
BAGLEY: Thanks for having me.
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