The Second Circuit Court of Appeals affirmed a district court’s order granting summary judgment in favor of the government, finding that the government’s Medicare drug price regulation program did not violate a pharmaceutical company’s constitutional rights where the company’s participation in the program was voluntary and that the Centers for Medicare and Medicaid Services’s (CMS) issuance of its manufacturer agreement did not violate the Administrative Procedure Act (APA). Boehringer Ingelheim Pharms., Inc. v. Dep’t of Health & Hum. Servs., No. 24-2092 (Aug. 7, 2025).
The Inflation Reduction Act of 2022 created the Medicare Drug Price Negotiation Program (the program), which is aimed at limiting the federal government’s spending on prescription drugs under Medicare Parts B and D. The CMS is required to select several of its highest-expenditure drugs for participation in the program annually and negotiate maximum fair prices for the selected drugs for a calendar year without administrative or judicial review. For the 2026 pricing period, the CMS selected Jardiance, a drug produced by Boehringer Ingelheim Pharmaceuticals, Inc. (Boehringer).
Boehringer signed a manufacturer agreement to participate in the program, obligating it to make the maximum fair price for Jardiance—34 percent of its 2023 private market price—available to hospitals, pharmacies, and other eligible entities effective January 1, 2026. However, Boehringer indicated that it entered into the manufacturer agreement under protest and filed a lawsuit against the government alleging the program violated its constitutional rights and the APA. The federal district court granted the government’s motion for summary judgment, and Boehringer appealed.
The Second Circuit Court of Appeals rejected Boehringer’s constitutional arguments based on Garelick v. Sullivan, 987 F.2d 913 (2d Cir. 1993), in which it had ruled that there is no taking without just compensation under the Fifth Amendment of the US Constitution when a service provider voluntarily participates in a price-regulated program or activity. Although Boehringer would be required to entirely opt out of the Medicare program—losing more than half of its domestic sales—or incur a significant excise tax if it chose not to participate in the program, economic hardship is not the same as a legal compulsion to engage in price-regulated activity. Boehringer’s participation in Medicare was voluntary; placing conditions on its participation in Medicare, even if it resulted in economic hardship, did not amount to an unconstitutional taking.
In addition, the court held that the program did not violate Boehringer’s due process rights under the Fifth Amendment because Boehringer’s voluntary decision to participate in the price-regulated program instead of opting out did not give rise to any protected property interest. Thus, it could not prevail on a procedural due process claim.
The court also rejected Boehringer’s argument that the program violated its First Amendment right to free speech by compelling it to adopt the government’s views contained in the manufacturer agreement, including references to terms such as negotiations and maximum fair price. The court held that a violation occurs only when a governmental measure compels expressive conduct. Because CMS provided an expedited process whereby Boehringer could withdraw from the program, its assent to the manufacturer agreement was not compulsory. Thus, its First Amendment rights were not violated.
Further, the program did not indirectly violate Boehringer’s First and Fifth Amendment rights by imposing unconstitutional conditions on its ability to participate in Medicare: To the contrary, laws that establish conditions on spending under federally funded programs, such as CMS’s establishment of a price-regulated program to limit its costs for drugs, but do not impact the recipients’ activities in the private market, do not amount to unconstitutional conditions. The program did not regulate Boehringer’s sales of Jardiance in the private market: It applied only to sales of the drug within the Medicare program.
Finally, the court ruled that CMS had not violated the APA by issuing the manufacturer agreement without the usual notice-and-comment process because the APA provides that a subsequent statute may supersede its rulemaking provisions. The Inflation Reduction Act expressly exempted the CMS negotiation program from the APA’s rulemaking requirements for the first three pricing periods. Thus, the court affirmed the district court’s judgment.
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