The Inflation Reduction Act includes a 95% excise tax on drug companies that don’t agree to the government’s price controls. NTUF’s Taxpayer Defense Center filed an amicus curiae (“friend of the court”) brief in the U.S. Court of Appeals for the Second Circuit, explaining why this tax isn’t really a tax but more of a punishment, violating the Eighth Amendment protection against the government levying excessive fines.
Usually, when people negotiate, they can choose to walk away if they don’t like the deal. But under the IRA’s Drug Pricing Program, if companies don’t accept the government’s price, they get hit with this 95% tax on their past revenues from selling drugs to federal programs like Medicare. This excise tax is so high and punishing that it acts more like a penalty and places a huge burden on a major sector of the economy. Additionally, this Program takes away the control companies have over their products, a regulatory taking of their property without proper payment in violation of the Fifth Amendment’s Takings Clause. The penalties are so severe they effectively take all the economic value from the sale of the drugs.
Our brief urges that the Second Circuit hold that the 95% excise tax is unconstitutional and reverse the District Court for the District of Connecticut. We made similar arguments to the Third Circuit in cases brought by other pharmaceutical companies. (The Third Circuit just heard oral arguments in that case.) If the two Circuits split on how to handle the issues raised by the drug makers, then the United States Supreme Court is likely to take up at least one of the cases.
We need to ensure that, when the government tries to reduce costs, we don’t harm the fundamental right to create new technology and earn a living from it.
The Second Circuit case is Boehringer Ingelheim v. Health and Human Services et al. (2d Cir. No 24-2092).