Background

At issue is the Inflation Reduction Act (IRA), P.L. 117-169, which directed the Department of Health and Human Services (HHS) to negotiate the prices of certain high-cost drugs covered under Medicare. To secure manufacturer participation, the IRA created an escalating excise tax under IRC § 5000D.

According to the 5th U.S. Circuit Court of Appeals, the statute expresses the tax rate as a percentage of the total sale price, including the tax amount, with the rate beginning at 65% and, after 271 days, reaching 95%. Expressed as a share of the post-tax amount the manufacturer keeps, that translates to a rate starting at 186% and climbing to 1,900%.

Suing in the U.S. District Court for the Western District of Texas, the National Infusion Center Association, the Global Colon Cancer Association, and the Pharmaceutical Research and Manufacturers of America argued that the program violates the nondelegation doctrine, the Eighth Amendment’s excessive fines clause, and the Fifth Amendment’s due process clause.

To dig deeper, visit the original article on the Thomson Reuters blog.