Democrats' desire to promote lower drug costs leads to crisis

A federal court in Dayton, Ohio, recently refrained from ruling on an important question: whether the government unconstitutionally forced pharmaceutical companies to sell their products at a loss.

The court said the U.S. Chamber of Commerce cannot bring its case in Ohio. But appeals courts across the country will eventually have to grapple with whether Congress can strip profits from industries it dislikes, effectively destroying them and the goods they supply.

In Dayton Chamber of Commerce v. BecerraDrug manufacturers challenged a confiscation provision in a 2022 law that allows the federal health agency to set prices for drugs in the Medicare program.

“Oh, that sounds nice,” you might be thinking. Kamala Harris, like President Biden, has touted this policy as a crowning achievement.

In reality, drugs will not become affordable until generics come to market. But generics will not come to market unless they can undercut the price of the brand-name drug (the first drug). The first drug will not come to market unless the government can recoup the enormous costs of developing and testing the product. In other words, the pharmaceutical industry is about to hit the brakes in a major way, and no American should be happy about that.

Beyond the market crash and its policy failures, there are constitutional issues that the Dayton Court must grapple with.

The Price-Fixing Act of 2022 violates the Fifth Amendment by stripping companies of their profits without due process. First, a quick overview of how the program works. Currently, companies participate in the Medicare and Medicaid programs because they are financially obligated to do so. The federal government pumps taxpayer money into these two government healthcare programs, which account for more than 40 percent of the dollars spent on drugs in America. If a drug manufacturer refuses to lower its price to the amount it is required to pay under the Price-Fixing Act, the state will withhold up to 1,900 percent of its daily sales. In addition, the state will prohibit drug manufacturers from supplying Medicare and Medicaid with other drugs. For one company named in the lawsuit, that would be 85 drugs.

And even if pharmaceutical companies could afford to forgo 40 percent of all dollars invested in the pharmaceutical industry in the United States, they would be penalized before they could withdraw because of the bureaucratic burdens they would face.

Precedents in several cases involving government price controls have limited the government's ability to charge unreasonably low prices, insisting instead that prices must be “just and reasonable.” The Fifth Amendment's Due Process Clause protects against price fixing that amounts to seizure, in part by requiring due process. But the 2022 law explicitly and specifically prohibits administrative and judicial review of the federal agency's price. The law does not set a lower limit for the “maximum fair price,” instead setting the upper limit at a ridiculously low 40 to 75 percent of each drug's average net selling price.

Another constitutional criticism is that Congress has unlawfully delegated broad, uncheckable power to a federal agency, the Department of Health and Human Services. Congress's job is to make laws, and an agency's job is to implement those laws. By telling the agency, “Pick some drugs and set some prices,” Congress violated the doctrine of nondelegation. Simply put, “Congress cannot delegate… powers that are strictly and exclusively legislative in nature to another branch of government.”

Democrats in Congress, who liked to claim they had lowered drug prices while looking the other way to see what happened next, have done just that.

If the courts uphold drug pricing laws, it will give a green light to lawmakers who want to give the executive branch more power to pursue their partisan political desires. People are unlikely to immediately object to drug companies violating their rights, at least not until they need one of their life-saving drugs…or when the long-awaited and long-sought supply of new treatments suddenly dries up.

We may not have to wait long to feel the consequences of a bad ruling, because lawmakers will have their appetites whetted by this case and will be tempted to try their luck again. And whose rights will they then claim?