Janssen v. Kennedy

The Constitution creates a federal government of limited, enumerated powers. Yet over time, the federal government has expanded its reach far beyond constitutional bounds, leveraging its spending power to regulate private industry and coerce compliance with policies it could not enact directly through legislation. The Inflation Reduction Act’s prescription drug price “negotiation” program is a prime example of this unconstitutional overreach.

Under the IRA’s Medicare drug pricing program, the Centers for Medicare and Medicaid Services (CMS) selects certain drugs each year for mandatory price “negotiation.” If a manufacturer refuses to participate, it must withdraw all of its drugs—not just those selected—from Medicare Part D and Medicaid coverage, effectively forcing it out of nearly half the nation’s prescription drug market. If a manufacturer agrees to participate but cannot reach a price agreement with CMS, the selected drugs are subject to an excise tax that begins at 185.71% and escalates daily to 1,900% within 270 days. As the Third Circuit dissent aptly noted, CMS made manufacturers “an offer [they] [couldn’t] refuse.”

The Liberty Justice Center has joined an amicus brief in Janssen v. Kennedy asking the U.S. Supreme Court to grant certiorari and rule that this coercive price control scheme violates the Constitution. The brief, in partnership with Advancing American Freedom, argues that Congress lacks an independent spending power under the General Welfare Clause, and that the IRA’s drug pricing program cannot be justified by the Necessary and Proper Clause either, since it uses federal purchasing power as a tool of regulation rather than a legitimate means of executing an enumerated power.

When the government acts as a buyer, it may negotiate prices in good faith. But when it uses its purchasing power to impose conditions on market participation and to expropriate value from private companies, it has exceeded constitutional limits. The IRA’s drug pricing program does not simply negotiate prices for drugs the government wishes to purchase—it leverages the government’s massive market share to force manufacturers to accept below-market prices under threat of exclusion from federal programs or punitive taxation. These conditions are not germane to the purchase of goods but are instead an attempt to regulate drug prices indirectly, bypassing the public consent necessary for valid legislation.

“Joe Biden bragged that he’d ‘beaten Medicare,’—and it turns out he may have been right for once, because the negotiation scheme he was referencing risks cutting off millions of Americans from necessary, FDA approved medication—to say nothing of putting the companies that make life saving medicine out of business,” says Reilly Stephens, Senior Counsel & Director of Amicus Practice at the Liberty Justice Center. “We hope the Supreme Court takes up the case, or Medicare may be beaten after all.”

The Liberty Justice Center’s work challenging government overreach reflects a core principle: no agency is above the Constitution, and the federal government must operate within the bounds of its enumerated powers. Allowing the government to use conditional spending as a tool of regulation threatens the structural protections that preserve American liberty.