Zoe Berg, Senior Photographer

On Tuesday, the Solomon Center for Health Law and Policy and the Federalist Society hosted a panel discussion on the Inflation Reduction Act — or IRA — and its billion-dollar implications for Medicare drug price negotiations.

The event delved into the ongoing legal battles between pharmaceutical companies and the Department of Health and Human Services, or HHS. Passed in 2022, the IRA granted HHS new authority to negotiate the prices of the most expensive drugs covered by Medicare, a government program that provides health insurance to millions of Americans aged 65 and older. 

Proponents argue that this provision reduces costs for taxpayers and patients by lowering prices on high-cost medications. However, opponents, including pharmaceutical companies, claim that these changes infringe on constitutional rights, stifle competition and discourage innovation by reducing the financial incentives for drug development. 

“This is not negotiation in any sense of the word,” James Stansel LAW ’97, the executive vice president and general counsel of Pharmaceutical Research and Manufacturers of America, or PhRMA, said at the panel. 

He criticized the IRA’s provisions that allow HHS to aim to negotiate drug prices for Medicare beneficiaries, describing the process as unconstitutional government overreach. 

Stansel also argued that the law discourages innovation in the pharmaceutical industry, particularly for small molecule drugs, which are critical to treating many diseases, including cancer.

Stansel explained that, under the IRA, drugs are subject to exclusivity periods, during which profits are not capped. This period allows manufacturers to recover their investments before being subjected to government-negotiated pricing. 

Different types of drugs are subjected to varying exclusivity periods. Small-molecule drugs, for example, are subject to price controls after a seven-year exclusivity period, while biologics, a different category of drugs, are given 11 years. Stansel believes that these limits discourage research and innovation in small-molecule drugs, as profits are collected for longer on biologics. 

The panel also addressed the ongoing lawsuits against the IRA, which Stansel and PhRMA have spearheaded. 

Plaintiffs argue that the law violates the Constitution’s separation of powers, due process protections and prohibition against excessive fines. They claim that Congress delegated too much power to HHS to implement the IRA’s drug price negotiation program, allowing HHS to create and enforce economic policies without much congressional oversight. 

Similarly, plaintiffs argue that the IRA denies manufacturers the opportunity to participate in or challenge the price-setting process.

Such arguments state that the excise tax imposed on manufacturers who refuse to negotiate prices violates the Eighth Amendment, which prohibits excessive fines. Stansel described this tax as punitive.

Another panelist, Joel McElvain, the acting deputy general counsel for HHS, defended the IRA’s framework. He argued that the tax is lawful under existing statutory authority and part of a system that manufacturers voluntarily engage with if they choose to sell drugs through Medicare.

“Manufacturers have the option to participate or not,” McElvain said.

However, participation in Medicare is mandatory for manufacturers who produce products falling into Parts B and D — physician-administered drugs, often for serious or chronic conditions, and self-administered prescription medications. 

Drugs selected for negotiation under the IRA are among the most expensive in these programs, and manufacturers face significant financial consequences if they choose not to comply, including losing access to Medicare reimbursement. This ensures that manufacturers of these targeted drugs remain involved in the process. 

Yet, McElvain said that IRA promotes competition in the pharmaceutical market. He highlighted that the law incentivizes the development of biosimilars — cheaper alternatives to brand-name biologic drugs — which already account for 91 percent of prescriptions in the United States.

McElvain also dismissed fears of reduced pharmaceutical innovation, suggesting that the law’s impact would be minimal, describing it as real but “very small.”

The third panelist, Michael F. Cannon, director of health policy studies at the libertarian think tank Cato Institute, criticized both the pharmaceutical industry and the government for inefficiencies in the healthcare market. 

Cannon argued that the current system often incentivizes excessive innovation at a high cost, resulting in the development of only marginally beneficial drugs, where the costs do not reflect the benefits. 

“There’s going to be an optimal level of innovation,” Cannon said. “Beyond a certain point, you might be getting too much innovation,” suggesting that the IRA’s provisions might bring the market closer to balance.

The debate underscored the high stakes of the IRA as the legislation continues to reshape drug pricing and innovation in the United States. While proponents see it as a necessary step to control Medicare’s spiraling costs, critics warn of its potential to destabilize the pharmaceutical industry. 

Those at the event found the broad range of speakers helpful, with all three panelists weighing in with contrasting views.

“I really enjoyed it because we don’t always get the opportunity to have both sides of an argument equally represented in our talks,” moderator Alyshia Laidlaw LAW ’26 said. “I think it was great to both hear from the government and the industry.” 

The Inflation Reduction Act was passed in August 2022.