PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT
____________

No. 24-1820
____________

BRISTOL MYERS SQUIBB CO.,

Appellant

v.

SECRETARY UNITED STATES DEPARTMENT OF

HEALTH AND HUMAN SERVICES; ADMINISTRATOR
CENTERS FOR MEDICARE & MEDICAID SERVICES;
UNITED STATES DEPARTMENT OF HEALTH AND
HUMAN SERVICES; CENTERS FOR MEDICARE &
MEDICAID SERVICES *
(Amended as per the Clerk's 09/13/2024 Order)
____________

No. 24-1821
____________

JANSSEN PHARMACEUTICALS INC.,

Appellant

v.

SECRETARY UNITED STATES DEPARTMENT OF

HEALTH AND HUMAN SERVICES; ADMINISTRATOR
CENTERS FOR MEDICARE & MEDICAID SERVICES;
UNITED STATES DEPARTMENT OF HEALTH AND
HUMAN SERVICES; CENTERS FOR MEDICARE &
MEDICAID SERVICES
____________

On Appeal from the United States District Court

for the District of New Jersey
(D.C. Civil Nos. 3:23-cv-03335, 3:23-cv-03818)
District Judge: Honorable Zahid N. Quraishi
____________

Argued on October 30, 2024

Before: HARDIMAN, PHIPPS, and FREEMAN, Circuit

Judges

(Opinion filed: September 4, 2025)

2
Jacob (Yaakov) M. Roth* [ARGUED]
Noel J. Francisco
John H. Thompson
Jones Day
51 Louisiana Avenue NW
Washington, DC 20001

Rajeev Muttreja
Jones Day
250 Vesey Street
New York, NY 10281

Jeffrey J. Greenbaum
Katherine M. Lieb
Sills Cummis & Gross P.C.
One Riverfront Plaza
Newark, NJ 07102
Counsel for Appellant Bristol Myers Squibb Co.

Kevin F. King [ARGUED]

Bradley K. Ervin
Robert A. Long, Jr.
Michael M. Maya
Covington & Burling LLP
One CityCenter, 850 Tenth Street, NW
Washington, DC 20001
Counsel for Appellant Janssen Pharmaceuticals Inc.

*
Jacob (Yaakov) M. Roth withdrew as counsel on February
20, 2025, prior to the issuance of this opinion.

3
Catherine M. Padhi* [ARGUED]
Steven A. Myers
Lindsey Powell
David L. Peters
Michael S. Raab
Maxwell A. Baldi
United States Department of Justice, Appellate Section
Room 7259
950 Pennsylvania Avenue NW
Washington, DC 20530
Counsel for Appellees

Maame A. Gyamfi
AARP Foundation Litigation
601 E Street NW
Washington, DC 20049
Counsel for Amici AARP, AARP Foundation, Justice in
Aging, Center for Medicare Advocacy, and Medicare
Rights Center

Flavio L. Komuves
Weissman & Mintz
220 Davidson Avenue, Suite 410
Somerset, NJ 08873
Counsel for Amicus Abrams Institute for Freedom of
Expression

*
Catherine M. Padhi withdrew as counsel on July 11, 2025,
prior to the issuance of this opinion.

4
Craig B. Bleifer
McGuireWoods
1251 Avenue of the Americas, 20th Floor
New York, NY 10020

Caroline L. Wolverton
Akin Gump Strauss Hauer & Feld
2001 K Street NW
Washington, DC 20006
Counsel for Amicus Alliance for Aging Research

Robin F. Thurston
Democracy Forward Foundation
P.O. Box 34553
Washington, DC 20043
Counsel for Amici American College of Physicians,
American Geriatrics Society, American Public Health
Association, American Society of Hematology, Society
of General Internal Medicine

Lawrence S. Ebner
Atlantic Legal Foundation
1701 Pennsylvania Avenue NW, Suite 200
Washington, DC 20006
Counsel for Amicus Atlantic Legal Foundation

5
David A. Hatchett
Matthew P. Hooker
Daniel G. Jarcho
Alston & Bird
1201 W. Peachtree Street
One Atlantic Center, Suite 4900
Atlanta, GA 30309
Counsel for Amicus Biotechnology Innovation
Organization

Jay R. Carson
Wegman Hessler
6055 Rockside Woods Boulevard, Suite 200
Cleveland, OH 44131
Counsel for Amicus Buckeye Institute

Hannah W. Brennan
Hagens Berman Sobol Shapiro
One Faneuil Hall Square, Fifth Floor
Boston, MA 02109

Jamie Crooks
Fairmark Partners
400 7th Street NW, Suite 304
Washington, DC 20004
Counsel for Amici Center for American Progress,
Century Foundation, NAACP, and Unidos US Action
Fund

6
Jeffrey S. Bucholtz
Alexander Kazam
King & Spalding
1700 Pennsylvania Avenue NW, Suite 900
Washington, DC 20006
Counsel for Amicus Chamber of Commerce of the
United States of America

Brianne J. Gorod
Constitutional Accountability Center
1200 18th Street NW, Suite 501
Washington, DC 20036
Counsel for Amicus Constitutional Accountability
Center

Charles L. Becker
Kline & Specter
1525 Locust Street, 19th Floor
Philadelphia, PA 19102
Counsel for Amici Democratic Senators

7
Nandan M. Joshi
Public Citizen Litigation Group
1600 20th Street NW
Washington, DC 20009

Jody T. Lopez-Jacobs
Andrew M. Milz
Flitter Milz
1814 E. Route 70, Suite 350
Cherry Hill, NJ 08003
Counsel for Amici Doctors for America, Families USA,
Protect Our Care, and Public Citizen

Neil Lloyd
ArentFox Schiff
233 S. Wacker Drive, Suite 7100
Chicago, IL 60606
Counsel for Amicus Fresenius Kabi USA LLC

Deepak Gupta
Gupta Wessler
Suite 850 North
2001 K Street NW
Washington, DC 20006
Counsel for Amici Health Policy Scholars

8
Alyssa H. Card
Margaret Dotzel
William B. Schultz
Zuckerman Spaeder
2100 L Street NW, Suite 400
Washington, DC 20037
Counsel for Amici Healthcare & Medicare Experts

Joseph P. Ashbrook
Benjamin M. Flowers
Ashbrook Byrne Kresge
P.O. Box 8248
Cincinnati, OH 45249

D. Adam Candeub
Michigan State University College of Law
648 N. Shaw Lane
East Lansing, MI 48824

Richard A. Epstein
University of Chicago Law School
1111 E. 60th Street, Suite 436
Chicago, IL 60611
Counsel for Amicus Independent Women’s Forum

Felicia H. Ellsworth
Wilmer Cutler Pickering Hale & Dorr
60 State Street
Boston, MA 02109
Counsel for Amicus Institute for Free Speech

9
Hannah W. Brennan
Rebekah Glickman-Simon
Claudia Morera
Hagens Berman Sobol Shapiro
One Faneuil Hall Square, 5th Floor
Boston, MA 02109
Counsel for Amici Law Professors and Scholars

Thomas S. Jones
Nelson Mullins
One PPG Place, Suite 3200
Pittsburgh, PA 15222
Counsel for Amicus Manhattan Institute

Paul W. Hughes, III

McDermott Will & Schulte
500 N. Capitol Street NW
Washington, DC 20001
Counsel for Amicus National Association of
Manufacturers

Tyler L. Martinez
National Taxpayers Union Foundation
122 C Street NW, Suite 700
Washington, DC 20001
Counsel for Amicus National Taxpayers Union
Foundation

10
Andrew J. Morris
New Civil Liberties Alliance
4250 N. Fairfax Drive, Suite 300
Arlington, VA 22203
Counsel for Amicus New Civil Liberties Alliance

Michael D. Lieberman
Fairmark Partners
400 7th Street NW, Suite 304
Washington, DC 20004
Counsel for Amicus Patients for Affordable Drugs

Elizabeth J. Sher
Day Pitney
One Jefferson Road
Parsippany, NJ 07054
Counsel for Amicus Pioneer Public Interest Law Center

Brian T. Burgess
Goodwin Procter
1900 N Street NW
Washington, DC 20036
Counsel for Amicus Teva Pharmaceuticals USA Inc.

11
Ilana H. Eisenstein
DLA Piper
1650 Market Street
One Liberty Place, Suite 5000
Philadelphia, PA 19103
Counsel for Amicus Daniel E. Troy

Cory L. Andrews
Washington Legal Foundation
2009 Massachusetts Avenue NW
Washington, DC 20036
Counsel for Amicus Washington Legal Foundation
_______________

OPINION OF THE COURT

_______________

FREEMAN, Circuit Judge.

Medicare Part D is a voluntary prescription drug benefit

program for Medicare beneficiaries. When Congress first
created Part D in 2003, it barred the Centers for Medicare and
Medicaid Services (“CMS”) from using its market share to
negotiate lower prices for the drugs it covers. But Congress
changed course when it enacted the Inflation Reduction Act of
2022 (the “IRA”). The IRA includes a Drug Price Negotiation
Program (the “Program”) that directs CMS to negotiate prices
over a subset of covered drugs that lack a generic competitor
and represent the highest expenditures to the government.

12
 In these cases, Bristol Myers Squibb Company
(“BMS”) and Janssen Pharmaceuticals Incorporated
(“Janssen”) (together, “the Companies”) challenge the
Program on constitutional grounds. They contend that the
Program (1) effects an uncompensated taking of their property,
(2) compels speech in violation of the First Amendment, and
(3) imposes unconstitutional conditions on participation.

The District Court determined that these claims fail as a

matter of law and entered judgments in favor of the
government. For the following reasons, we will affirm the
District Court’s orders.

“Medicare is a federal medical insurance program for

people ages sixty-five and older and for younger people with
certain disabilities.” AstraZeneca Pharms. LP v. Sec’y U.S.
Dep’t of Health & Hum. Servs., 137 F.4th 116, 119 (3d Cir.
2025).1 Medicare is divided into Parts, one of which is Part D:
“a voluntary prescription drug benefit program that subsidizes
the cost of prescription drugs and prescription drug insurance
premiums for Medicare enrollees.” United States ex rel. Spay
v. CVS Caremark Corp., 875 F.3d 746, 749 (3d Cir. 2017).
Part D reimburses private insurance companies called
“sponsors,” who work with pharmacy benefit managers and
other subcontractors, who in turn contract with pharmacies that

1
Our opinion in AstraZeneca provides more detail on
Medicare Part D, the Program, and CMS’s implementation of
the IRA’s directives. See 137 F.4th at 119–21.

13
provide drugs to Medicare beneficiaries. AstraZeneca, 137
F.4th at 120. “Through Medicare and Medicaid, the federal
government pays for almost half the annual nationwide
spending on prescription drugs.” Id. at 119 (cleaned up).2

When Congress created Part D, it included a provision

that barred CMS from “interfer[ing] with the negotiations
between drug manufacturers and pharmacies and . . . sponsors”
and from “institut[ing] a price structure for the reimbursement
of covered part D drugs.” 42 U.S.C. § 1395w-111(i) (2003).
But Congress created an exception to that non-interference
provision when it enacted the Program. The Program directs
CMS to “negotiate . . . maximum fair prices” for certain drugs.
Id. § 1320f(a)(3). The drugs subject to negotiation are those
that have been approved by the Food and Drug Administration
for at least seven years, lack a generic competitor, and
represent the highest expenditures under Medicare Part B or D.
AstraZeneca, 137 F.4th at 120.3

Once CMS selects and announces which drugs are

subject to negotiation, a pharmaceutical manufacturer that
holds regulatory approval for a selected drug must choose
whether to participate in the Program. If the manufacturer
chooses to participate, it executes a Medicare Drug Price

2
“Medicaid is a joint federal and state program that provides
medical coverage for people with limited incomes.”
AstraZeneca, 137 F.4th at 119.
3
Medicare Part B is a voluntary insurance program covering
outpatient care, including prescription drugs typically
administered by a physician, while Part D covers self-
administered drugs. See AstraZeneca, 137 F.4th at 120.

14
Negotiation Program Agreement (“Agreement”) with CMS. In
2023, CMS provided a template Agreement on its website.
CMS, Medicare Drug Price Negotiation Program Agreement,
https://www.cms.gov/files/document/inflation-reduction-act-
manufacturer-agreement-template.pdf
[https://perma.cc/ZC3E-XCQ5]. In an introductory paragraph,
the Agreement states:

CMS is responsible for the administration of the

Medicare Drug Price Negotiation Program . . . ,
which sets forth a framework under which
manufacturers and CMS may negotiate to
determine a price (referred to as “maximum fair
price” in the Act) for selected drugs in order for
manufacturers to provide access to such price to
maximum fair price eligible individuals . . . .

Id. at 1. The Agreement goes on to summarize the statutory

process for the exchange of offers and counteroffers, stating
that the parties agree to “negotiate to determine . . . a maximum
fair price,” in accordance with the statutory scheme.4 Id. at 2.
It also specifies that the “[u]se of the term ‘maximum fair
price’ and other statutory terms throughout this Agreement
reflects the parties’ intention that such terms be given the
meaning specified in the statute and does not reflect any party’s

4
When CMS negotiates a price for a selected drug, it must
consider several factors, including the drug’s production and
development costs and federal involvement in its development.
See AstraZeneca, 137 F.4th at 121 (summarizing factors). It
also must adhere to a statutory price cap based on the drug’s
price on the private market and number of years on the market.
See id. at 120–21.

15
views regarding the colloquial meaning of those terms.” Id. at
4. (The statute defines “maximum fair price” to mean “with
respect to a year during a price applicability period and with
respect to a selected drug . . . with respect to such period, the
price negotiated pursuant to section 1320f-3 of this title, and
updated pursuant to section 1320f-4(b) of this title, as
applicable, for such drug and year.” 42 U.S.C. § 1320f(c)(3).)

If the parties agree to a “maximum fair price,” they

memorialize it in a Negotiated Maximum Fair Price
Addendum (“Addendum”) to the Agreement. See Agreement
at 7–9 (template Addendum). The manufacturer then must
provide Medicare beneficiaries “access to such price” for the
drug until CMS determines that a generic competitor is on the
market. 42 U.S.C. § 1320f-2(a)(1), (b).

If a manufacturer’s drug is selected for negotiation and

the parties fail to reach agreement on a price, the manufacturer
becomes subject to steep daily excise taxes delineated in the
IRA. See 26 U.S.C. § 5000D. Those excise taxes apply to
sales of selected drugs during “noncompliance periods” that
begin a few months after CMS selects the drug and last until
the parties reach an agreement on a price or until a generic
competitor is marketed. Id. § 5000D(b)(1), (b)(3).5 The excise
taxes escalate during a noncompliance period. Id. § 5000D(d).
The daily excise tax begins at 185.71% of a selected drug’s sale
price on the first day of noncompliance and reaches 1,900% of

5
For the first year of the Program, the noncompliance period
would have begun on October 2, 2023. 26 U.S.C.
§ 5000D(b)(1). For subsequent years, the noncompliance
period begins on the March 1st following the selection of a
drug for price negotiation. Id.

16
the sale price after 270 days. Id. § 5000D(a), (d). And these
excise taxes apply to all sales of the drug made during a
noncompliance period, including sales outside of the Medicare
system. Id. § 5000D(a).

A manufacturer can avoid the excise taxes if it

withdraws all of its drugs (not just those selected for
negotiation) from coverage in two programs: (1) Medicare Part
D’s Manufacturer Discount Program or its predecessor, the
Coverage Gap Discount Program,6 and (2) the Medicaid Drug
Rebate Program (together, “the Opt-Out Programs”). 26
U.S.C. § 5000D(c)(1)(A), (2).7 Any terminations from the
Manufacturer Discount Program or the Coverage Gap
Discount Program must go into effect before the excise taxes
are suspended. Id. § 5000D(c)(1)(A)(ii). For the Medicaid
Rebate Program, notice of termination is sufficient to suspend
the excise taxes. Id. §§ 5000D(c)(1)(A)(i), (2). If a
manufacturer reenters either of the Opt-Out Programs, the

6
The IRA replaced the Coverage Gap Discount Program with
the Manufacturer Discount Program, effective January 1, 2025.
See 42 U.S.C. § 1395w-114c. Because a manufacturer will
have agreements under only one of these programs at any given
time, the IRA only requires a manufacturer to terminate its
participation in one of those programs.
7
Although the parties and the dissent contend that a
manufacturer only avoids excise taxes by withdrawing its
drugs from Medicare and Medicaid entirely, the statute
specifies the two programs from which a manufacturer must
withdraw to avoid those excise taxes. References to the loss of
all Medicare and Medicaid funding are therefore misplaced.

17
taxes will go back into effect the next March 1st. Id.
§ 5000D(c)(1)(B).

In June 2023, BMS challenged the Program by suing the

Secretary of the Department of Health and Human Services
and the Administrator of CMS. In July 2023, Janssen did the
same. Both Companies sought declaratory and injunctive
relief, claiming violations of the Fifth Amendment’s Takings
Clause, the First Amendment, and the unconstitutional
conditions doctrine.

In August 2023, CMS published the list of ten drugs

selected for negotiation for 2026. BMS and Janssen each had
a drug on the list: for BMS, Eliquis, and for Janssen, Xarelto.
Each company agreed to participate in the Program and, while
these cases were pending, agreed to a price for its respective
drug.

In the District Court, these cases proceeded in tandem.

The parties agreed that the District Court could resolve the
constitutional claims on cross-motions for summary judgment,
without the need for discovery. The District Court did so in
April 2024, denying the Companies’ motions for summary
judgment and granting the government’s. The Companies
timely appealed, and we consolidated the appeals for purposes
of briefing and disposition.

18
 II8

We exercise plenary review of orders resolving cross-

motions for summary judgment, applying the same standard
used by district courts. Spivack v. City of Philadelphia, 109
F.4th 158, 165 (3d Cir. 2024). Summary judgment is
appropriate only “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). The
parties have stipulated that no material facts are in dispute and
that their motions present only questions of law.

III

“The Fifth Amendment’s Takings Clause prohibits the

government from taking private property for public use
without providing just compensation.” Newark Cab Ass’n v.
City of Newark, 901 F.3d 146, 151 (3d Cir. 2018) (internal
quotation marks omitted). Physical takings—i.e.,
appropriating or occupying private property—are “the clearest
sort of taking[s].” Cedar Point Nursery v. Hassid, 594 U.S.
139, 148 (2021) (cleaned up). Here, the Companies argue that
Program effects a physical taking because it permits the
government to physically appropriate their drugs without
paying just compensation.

The Companies are incorrect. The Program permits the

government to acquire the Companies’ drugs only when it pays

8
The District Court had jurisdiction under 28 U.S.C. § 1331.
We have jurisdiction under 28 U.S.C. § 1291.

19
prices the Companies have agreed to. If the Companies dislike
the prices the government is willing to pay, they are free to stop
doing business with the government. So the Companies’
participation in the Program is voluntary, and there is no
physical taking. We also decline to apply a version of the
unconstitutional conditions doctrine used to assess conditions
on land-use permitting to the Program (and, in any event, the
Program withstands scrutiny under the test the Companies
suggest).

To establish a physical taking, a party must show that

“the government has physically taken property for itself or
someone else—by whatever means.” Id. at 149.9 For example,
the government commits a physical taking “when it uses its
power of eminent domain to formally condemn property[,] . . .
physically takes possession of property without acquiring title
to it[,] . . . [or] occupies property—say, by recurring flooding
as a result of building a dam.” Id. at 147–48 (citations
omitted). A physical taking may involve real property or
personal property. Id. at 152. Either way, when the
government effects this type of physical appropriation, it “must
pay for what it takes.” Id. at 148 (citation omitted).

The various means of committing a physical taking

share one feature: a government mandate. Absent a
government mandate to relinquish the use of private property,
there is no physical taking. Thus, there is no physical taking

9
The Companies do not argue that the Program constitutes a
regulatory taking. See Cedar Point Nursery, 594 U.S. at 148–
49 (distinguishing physical from regulatory takings).

20
when a party gives up private property as part of a voluntary
exchange with the government. See Valancourt Books, LLC v.
Garland, 82 F.4th 1222, 1232 (D.C. Cir. 2023).

The government is a major purchaser in our Nation’s

economy. When it acts as a purchaser, “the Government
enjoys the unrestricted power . . . to fix the terms and
conditions upon which it will make needed purchases,” just as
private individuals and businesses do. Perkins v. Lukens Steel
Co., 310 U.S. 113, 127 (1940). Because contracts delineate the
terms of many government purchases, items subject to
government contracts rarely give rise to takings claims. See
Hughes Commc’ns Galaxy, Inc. v. United States, 271 F.3d
1060, 1070 (Fed. Cir. 2001).

The Companies have signed contracts specifying the

prices at which they will provide their drugs to Medicare
beneficiaries. Despite those contracts, the Companies raise
Takings Clause challenges, asserting that the contracts they
signed were not voluntary. But the Companies acknowledge
(as they must) that they are not legally compelled to participate
in Medicare. See 42 U.S.C. § 1395cc (allowing providers to
elect to enter into agreements under Medicare); see also United
States ex rel. Spay v. CVS Caremark Corp., 875 F.3d 746, 749
(3d Cir. 2017) (describing Medicare Part D as “voluntary”). So
if the companies opt not to participate in Medicare, they need
not sign any contracts regarding drug sales to Medicare
beneficiaries. This opt-out option defeats the Companies’
argument that they were forced to sign contracts under the
Program.

21
 This logic underlies the decisions of our sister Courts of
Appeals in analogous cases. Medical providers who have
brought takings claims about Medicare or Medicaid have
uniformly lost due to their ability to stop participating in those
programs.10 Recently, the Second Circuit applied these cases

10
See Franklin Mem’l Hosp. v. Harvey, 575 F.3d 121, 129–30
(1st Cir. 2009) (holding that a hospital voluntarily participated
in Medicaid, precluding takings liability, because it had the
alternative of pursuing Medicaid-eligible patients directly for
the amount that Medicaid would otherwise reimburse);
Garelick v. Sullivan, 987 F.2d 913, 916–17 (2d Cir. 1993)
(holding that limits on what physicians could charge Medicare
Part B beneficiaries effected no taking, because the physicians
“voluntarily choose to provide services in the price-regulated
Part B program” and “retain the right to provide medical
services to non-Medicare patients”); id. at 917 (“All court
decisions of which we are aware that have considered takings
challenges by physicians to Medicare price regulations have
rejected them in the recognition that participation in Medicare
is voluntary.”); Burditt v. U.S. Dep’t of Health & Hum. Servs.,
934 F.2d 1362, 1376 (5th Cir. 1991) (holding that a federal law
requiring hospitals that participate in Medicare to treat
emergency patients was not a taking of their physicians’
services because hospitals voluntarily participated in the
program); St. Francis Hosp. Ctr. v. Heckler, 714 F.2d 872,
875–76 (7th Cir. 1983) (holding that hospitals did not suffer a
taking when they were not reimbursed by Medicare for certain
capital expenditures, because “provider participation is
voluntary”); Key Med. Supply, Inc. v. Burwell, 764 F.3d 955,
965–66 (8th Cir. 2014) (concluding that a medical equipment

22
to reject a functionally identical takings challenge to the
Program. See Boehringer Ingelheim Pharms., Inc. v. HHS, ___
F.4th ___, 2025 WL 2248727, at *8 (2d Cir. Aug. 7, 2025)
(“[B]ecause Boehringer voluntarily chose to participate in the
. . . Program, no taking has occurred.”).

Despite the Companies’ ability to withdraw from the

Opt-Out Programs, they argue that their participation is not
“voluntary” because of their dependence on Medicare and
Medicaid reimbursements and the size of the government’s
market share. In their view, basic economic rationality dictates
participation in those federal programs, making the exit option
illusory.11 But, as our sister courts have recognized, “economic

provider’s takings claim against a competitive-bidding system

for Medicare pricing was “patently meritless” under Circuit
precedent finding Medicaid participation voluntary); Baker
Cnty. Med. Servs., Inc. v. Att’y Gen., 763 F.3d 1274, 1279–80
(11th Cir. 2014) (holding that a mandate that hospitals
participating in Medicare treat federal detainees was not a
taking); see also Livingston Care Ctr., Inc. v. United States,
934 F.2d 719, 720 (6th Cir. 1991) (observing, in the context of
a due process challenge, that “participation in the Medicare
program is a voluntary undertaking”).
11
The Companies also note that the Congressional Research
Service anticipated the Program’s excise tax provisions—
applicable to manufacturers who remain participants in the
Opt-Out Programs and fail to reach a price agreement—would
raise zero revenue. This forecast reflects the strong incentive
to reach agreement with CMS if a manufacturer chooses to
participate in the Program. But it does not reflect the additional

23
hardship is not equivalent to legal compulsion for purposes of
takings analysis.” Baker Cnty. Med. Servs., Inc. v. Att’y Gen.,
763 F.3d 1274, 1280 (11th Cir. 2014) (“Although the Hospital
contends that opting out of Medicare would amount to a grave
financial setback, economic hardship is not equivalent to legal
compulsion for purposes of takings analysis.” (internal
quotation marks omitted)); accord Boehringer, 2025 WL
2248727, at *7 (“[T]he choice to participate in a voluntary
government program does not become involuntary simply
because the alternatives to participation appear to entail worse,
even substantially worse, economic outcomes.”); Garelick v.
Sullivan, 987 F.2d 913, 917 (2d Cir. 1993) (rejecting an
argument that non-participation in Medicare “is not an
economically viable option,” because “economic hardship is
not equivalent to legal compulsion for purposes of takings
analysis”); Minn. Ass’n of Health Care Facilities, Inc. v. Minn.
Dep’t of Pub. Welfare, 742 F.2d 442, 446 (8th Cir. 1984)
(“Despite the strong financial inducement to participate in
Medicaid, a nursing home’s decision to do so is nonetheless
voluntary.”); St. Francis Hosp. Ctr. v. Heckler, 714 F.2d 872,
875 (7th Cir. 1983) (“[T]he fact that practicalities may in some
cases dictate participation does not make participation
involuntary.”).

Those courts’ reasoning makes sense. The federal

government, by virtue of its size, possesses a sizable market
share in many of the markets it enters. In certain markets—for
example, for military hardware that is unlawful for civilians to
own—the government may be the only purchaser. Economic

way for a manufacturer to avoid being assessed excise taxes:

by choosing not to participate in the Program and withdrawing
from the Opt-Out Programs.

24
factors may have a strong influence on a company’s choice to
do business with the government, but a company that chooses
to do so still acts voluntarily.

II

The Companies resist the withdrawal option’s

dispositive effect on their takings claim. They make arguments
based on two Supreme Court decisions, and they raise one
practical objection. None is availing.

First, the Companies invoke the Supreme Court’s

Takings Clause decision in Horne v. Department of
Agriculture, 576 U.S. 350 (2015). Horne involved a federal
government mandate that raisin growers reserve a percentage
of their crop for the government, free of charge. Id. at 354–55.
When a family of raisin growers refused to comply with the
reserve requirement, the government sent trucks to the family’s
raisin-handling facility to collect the reserve raisins, and when
the family refused entry to the trucks the government assessed
a fine and civil penalty. Id. at 356. The Court held that the
government’s reserve requirement was “a clear physical
taking” because it caused “[a]ctual raisins [to be] transferred
from the growers to the Government.” Id. at 361.

In defending the reserve requirement, the government

argued that raisin growers “voluntarily choose to participate in
the raisin market” and could avoid the reserve requirement by
“plant[ing] different crops” or by selling their “raisin-variety
grapes as table grapes or for use in juice or wine.” Id. at 365
(citation omitted). It likened the case to Ruckelshaus v.
Monsanto Company, 467 U.S. 986 (1984), where the Court
held that the Environmental Protection Agency could require
companies to disclose health, safety, and environmental

25
information about the hazardous pesticides they sell as a
condition of receiving permits to sell those products. Horne,
576 U.S. at 365–66. The Court rejected the government’s
attempt to extend Monsanto by characterizing participation in
interstate raisin markets as a special governmental benefit, akin
to a permit to sell dangerous chemicals. Id. at 366. Because
selling raisins was a “basic and familiar use[] of property,” not
part of a voluntary exchange with the government, the Court
held that the government’s taking required just compensation.
Id. at 366–67.

The Companies argue that Horne controls this case.

Not so. To avoid the reserve requirement in Horne, the raisin
growers would have had to exit the raisin market entirely. See
id. at 364–65 (characterizing the reserve requirement as “a
condition on permission to engage in commerce” of raisins
(internal quotation marks omitted)). Here, if the Companies
wish to avoid the excise taxes, they can withdraw from the Opt-
Out Programs and remain free to participate in the
pharmaceutical market—including by selling Xarelto and
Eliquis to private parties.12 Thus, Horne does not disturb our

12
Janssen attempts to reframe the relevant market in Horne as
one for grapes, rather than raisins, arguing that the growers
could sell their products to other buyers just as Janssen could
sell Xarelto to private parties. But the Court made clear in
Horne that raisin growers’ theoretical ability to sell “raisin-
variety grapes” for non-raisin uses was no real alternative. See
576 U.S. at 365 (citation omitted). Instead, the government’s
argument failed because it would have forced raisin growers to
cease doing business as raisin growers. Id. Here, losing
Medicare reimbursement would not preclude Janssen from
selling its drugs to private parties.

26
conclusion that the voluntary nature of Medicare participation
precludes takings liability.13

The Companies also rely on National Federation of

Independent Business v. Sebelius, 567 U.S. 519 (2012)
(“NFIB”). NFIB struck down a provision of the Patient
Protection and Affordable Care Act (“PPACA”) that
conditioned all of a State’s Medicaid funds on the State’s
expanding of Medicaid eligibility. Id. at 585. The Court
applied the anti-commandeering doctrine, which bars the
federal government from “commandeer[ing] a State’s
legislative or administrative apparatus for federal purposes.”
Id. at 577. Because the challenged PPACA provision
“threatened loss of over 10 percent of a State’s overall budget,”
the Court concluded that it was “economic dragooning that
le[ft] the States with no real option but to acquiesce in the
Medicaid expansion.” Id. at 582.

The Companies characterize the Program as economic

dragooning, just like in NFIB. But the Companies ignore
NFIB’s explicit and repeated focus on federalism and the

13
Other courts have reached the same conclusion. See, e.g.,
Se. Ark. Hospice, Inc. v. Burwell, 815 F.3d 448, 450 (8th Cir.
2016) (citing Horne for the proposition that because
participation in a hospice program run through Medicare is a
“voluntary exchange,” it cannot create takings liability); Va.
Hosp. & Healthcare Ass’n v. Roberts, 671 F. Supp. 3d 633,
666–67 (E.D. Va. 2023) (distinguishing Horne); see also, e.g.,
Eli Lilly & Co. v. U.S. Dep’t of Health & Hum. Servs., No.
1:21-cv-00081-SEB-MJD, 2021 WL 5039566, at *21 (S.D.
Ind. Oct. 29, 2021); Kaiser Found. Health Plan, Inc. v.
Burwell, 147 F. Supp. 3d 897 (N.D. Cal. 2015).

27
States’ role as distinct sovereigns.14 Federalism prohibits the
federal government from trampling on a State’s prerogatives
under the Tenth Amendment. See id. at 577–78; Printz v.
United States, 521 U.S. 898, 918–22 (1997) (“[O]ur citizens .
. . have two political capacities, one state and one federal, each
protected from incursion by the other . . . .” (cleaned up)); New
York v. United States, 505 U.S. 144, 156–57 (1992) (“[T]he
Tenth Amendment confirms that the power of the Federal

14
See, e.g., 567 U.S. at 577 (“Spending Clause legislation
[may] not undermine the status of the States as independent
sovereigns in our federal system.”); id. at 577–78 (“[W]hen
pressure turns into compulsion, the legislation runs contrary to
our system of federalism. The Constitution simply does not
give Congress the authority to . . . directly command[] a State
to regulate or indirectly coerce[] a State to adopt a federal
regulatory system as its own.” (cleaned up)); id. at 578
(“Permitting the Federal Government to force the States to
implement a federal program would threaten the political
accountability key to our federal system. . . . [W]hen a State
has a legitimate choice whether to accept the federal conditions
in exchange for federal funds[,] . . . state officials can fairly be
held politically accountable for choosing to accept or refuse the
federal offer.”); id. at 579 (“In the typical case we look to the
States to defend their prerogatives by adopting the simple
expedient of not yielding to federal blandishments when they
do not want to embrace the federal policies as their own.”
(internal quotation marks omitted)); id. at 580 (“When . . .
conditions take the form of threats to terminate other
significant independent grants, the conditions are properly
viewed as a means of pressuring the States to accept policy
changes.”).

28
Government is subject to limits that may, in a given instance,
reserve power to the States.”). These Tenth Amendment
concerns are simply not present here, where the federal
government contracts with private parties, rather than dealing
with separate sovereigns.15

Finally, we reach the Companies’ practical objection to

withdrawal. They argue that even if withdrawing from the
Opt-Out Programs precludes takings liability, the Program
does not permit the Companies to withdraw in time to suspend
the excise taxes.

Because CMS announced its selection of the

Companies’ drugs in August 2023, the excise taxes would have
kicked in on October 2, 2023, unless the Companies agreed to
participate in the Program or withdrew from the Opt-Out
Programs. 26 U.S.C. § 5000D(b)(1), (c)(1)(A).16 According

15
Moreover, the Companies’ reading of NFIB would
effectively bless all existing federal funding streams with
constitutional protection in perpetuity. If NFIB applies to the
government’s dealings with private parties, it is hard to see
how the government could ever renegotiate or discontinue
contracts. In the absence of any indication that the Court
intended to sweep so broadly, NFIB cannot support the weight
the Companies seek to put on it.
16
In 2023, the Coverage Gap Discount Program had not yet
been replaced by the Manufacturer Discount Program. See
supra n.6. Thus, to avoid excise taxes in October 2023, the
Companies needed to ensure that the termination of their
agreements under the Coverage Gap Discount Program had

29
to the Companies, to avoid any excise taxes beginning to
accrue in October 2023, the statute required them to terminate
their agreements in the Opt-Out Programs before the IRA was
even enacted. But the statute, as clarified by regulatory
guidance with the force of law, says otherwise.

Congress created two paths to effectuate termination of

a manufacturer’s agreements and suspend the excise taxes.17
The first path is manufacturer-initiated and requires a lengthy
period of notice: A manufacturer may terminate its agreements
with CMS “for any reason”—even over CMS’s objection—
upon providing 11 to 23 months’ notice. 42 U.S.C. §§ 1395w-
114a(b)(4)(B)(ii) (Coverage Gap Discount Program), 1395w-
114c(b)(4)(B)(ii) (Manufacturer Discount Program). The
second path is CMS-initiated and is much speedier: CMS may
terminate its agreements with a manufacturer “for a knowing
and willful violation of the requirements of the agreement or
other good cause shown” with only 30 days’ notice. Id.
§§ 1395w-114a(b)(4)(B)(i), 1395w-114c(b)(4)(B)(i). And
CMS announced in a regulatory guidance—one that has the
force of law—that it will find “good cause” to use the speedier

taken effect and give notice terminating their agreements under

the Medicaid Rebate Program. Id. § 5000D(c)(1)(A).
17
As discussed above, excise taxes are suspended when the
termination of a manufacturer’s agreements under one of the
Opt-Out Programs (the Coverage Gap Discount Program or its
replacement the Manufacturer Discount Program) has taken
effect. See supra Section I.A. A manufacturer need only give
notice of termination from its agreements under the Medicaid
Rebate Program to avoid excise taxes. 26 U.S.C.
§ 5000D(c)(1)(A), (2).

30
path to termination whenever a manufacturer submits notice of
its decision not to participate in the Drug Price Negotiation
Program. CMS, Medicare Drug Price Negotiation Program:
Revised Guidance, Implementation of Sections 1191-1198 of
the Social Security Act for Initial Price Applicability Year
2026, at 120–21 (June 30, 2023) (“2023 Revised Guidance”),
https://www.cms.gov/files/document/revised-medicare-drug-
price-negotiation-program-guidance-june-2023.pdf
[https://perma.cc/AV2Z-4F9U].18

18
See 42 U.S.C. § 1320f note (allowing CMS to implement the
Program by issuing program guidance for program years 2026
through 2028); 2023 Revised Guidance at 92–93 (stating that
the 2023 Revised Guidance is being promulgated without
notice and comment as final). The dissent contends that the
IRA does not authorize CMS to promulgate the 2023 Revised
Guidance without notice and comment. Dissent at 18 n.6; see
5 U.S.C. § 559 (contemplating that a statute may displace the
requirements of the Administrative Procedure Act “to the
extent that it does so expressly”). To determine if a statute
displaces the procedural requirements of the APA, we look for
“express language exempting agencies” or “alternative
procedures that could reasonably be understood as departing
from the APA.” California v. Azar, 911 F.3d 558, 579 (9th
Cir. 2018); accord Mann Constr., Inc. v. United States, 27
F.4th 1138, 1145 (6th Cir. 2022) (similar). Language that is
“permissive, wide-ranging, . . . and does not contain any
specific deadlines for agency action” suggests that Congress
did not mean to do away with APA requirements.
Pennsylvania v. Pres. United States, 930 F.3d 543, 566 (3d Cir.

31
 CMS issued the 2023 Revised Guidance two months
before it announced the drugs selected for the first round of
price negotiations. So before the Companies’ drugs were
selected for negotiation on August 29, 2023, the Companies
had been apprised of their ability to expedite withdrawal from
Medicare if they decided not to participate in the Program. Had
the Companies exercised that option promptly, they could have
avoided any excise tax liability.

The dissent sees the 30-day expedited withdrawal as

stretching the meaning of “other good cause” beyond what the
statutes can bear. See Dissent at 19–22. Because the phrase
“other good cause” appears following a specific ground upon
which CMS may terminate an agreement—“a knowing and
willful violation” of the agreement’s requirements—the
dissent would limit “good cause” to other forms of misconduct.
But good cause is “a uniquely flexible and capacious concept,
meaning simply a legally sufficient reason.” Polansky v. Exec.
Health Res. Inc., 17 F.4th 376, 387 (3d Cir. 2021) (internal
quotation marks omitted), affirmed sub nom. United States ex
rel. Polansky v. Exec. Health Res., Inc., 599 U.S. 419 (2023).
Congress chose to include that flexible and capacious phrase

2019) (cleaned up), rev’d on other grounds sub nom. Little

Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania,
591 U.S. 657 (2020). Here, the statute provides an alternative
procedure (issue program instruction or other forms of
program guidance) in mandatory terms (CMS “shall,” rather
than may, do so). 42 U.S.C. § 1320f note. That Congress
limited CMS’s authority to only the first three program years
supports this reading: “that Congress made a deliberate
decision to authorize an exemption (albeit temporary) from the
APA’s requirements.” Boehringer, 2025 WL 2248727, at *14.

32
alongside just one example of a legally sufficient reason for
CMS to terminate an agreement with a manufacturer. And it
makes sense that Congress would permit CMS to use the
speedier path to termination when CMS consents to a
manufacturer’s withdrawal, rather than when a manufacturer
acts unilaterally.

Moreover, the Companies entered into their Coverage

Gap Discount Program agreements before Congress enacted
the IRA. At that time, the Companies could not have known
that a future statute would condition excise taxes on the
continued existence of their Coverage Gap agreements. Later,
when CMS selected the Companies’ drugs for negotiation in
August 2023, the Companies had to decide whether to
participate in the Program or withdraw from their Coverage
Gap agreements in order to suspend the IRA’s excise taxes.
The unforeseeable legal and economic significance of the
Companies’ Coverage Gap agreements supports CMS’s
conclusion that a manufacturer’s decision not to participate in
the Program constitutes “other good cause” supporting an
expedited withdrawal from those agreements.19

19
The dissent also sees tension between a CMS-initiated
termination of a manufacturer’s agreement (which requires
CMS to send notice to the manufacturer) and the excise tax
statute (which says taxes are suspended when CMS receives
notice of terminations, 26 U.S.C. § 5000D(c)(1)(A)(i)). See
Dissent at 22–23. But all agree that CMS may remove a
malfeasant manufacturer unilaterally for a willful violation of
an agreement. And, post-termination, the malfeasant
manufacturer would avoid excise taxes even though CMS

33
 If Congress wished to limit CMS’s termination
authority to instances of manufacturer misconduct, it knew
how to do so. See Loper Bright Enters. v. Raimondo, 603 U.S.
369, 394–95 (2024). We see no conflict between the expedited
withdrawal that the 2023 Revised Guidance permits and the
intent of Congress, as expressed in the Medicare statutes.20

The Companies argue that even if the Program does not

directly seize their property, it still violates the Takings Clause
because it amounts to extortion. They ask us to apply the
Nollan-Dolan test—a test the Supreme Court has applied only
to takings claims involving land-use permits—to this case. See
Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 604
(2013) (“Nollan and Dolan involve a special application of
th[e] [unconstitutional conditions] doctrine that protects the
Fifth Amendment right to just compensation for property the
government takes when owners apply for land-use permits.”
(internal quotation marks omitted)).

never received any notice from the manufacturer. Thus,

“notice of terminations” must be read to include all notices,
whether initiated by a manufacturer or CMS.
20
Of course, if CMS were to retract its assurance in the 2023
Revised Guidance that it will find good cause to terminate a
manufacturer’s agreements whenever a manufacturer submits
notice of its decision not to participate in the Drug Price
Negotiation Program, that reversal could be deemed arbitrary
and capricious. See Encino Motorcars, LLC v. Navarro, 579
U.S. 211, 221–22 (2016).

34
 The Nollan-Dolan test is “modeled on the
unconstitutional conditions doctrine” and is designed to
“address th[e] potential abuse of the permitting process.”
Sheetz v. Cnty. of El Dorado, Cal., 601 U.S. 267, 275 (2024).
Under the test, “permit conditions must have an ‘essential
nexus’ to the government’s land-use interest, . . . [and] have
‘rough proportionality’ to the development’s impact on the
land-use interest.” Id. at 275–76 (first citing Nollan v. Cal.
Coastal Comm’n, 483 U.S. 825 (1987); and then citing Dolan
v. City of Tigard, 512 U.S. 374 (1994)). For example, if a
development were expected to increase traffic, the government
might condition approval on the developer turning over land
needed to widen a public road. Koontz, 570 U.S. at 605. Such
a condition would be related to the government’s interest in
protecting traffic-flows, though it would still need to be
proportional to the development’s impact on traffic. Id.

For over thirty years, the Supreme Court has not

expanded the Nollan-Dolan test beyond conditions on land-use
permitting. Instead, it has emphasized how that specific
context drives its reasoning. A special test for challenges to
land-use permitting is necessary because of “two realities of
the permitting process”: (1) “the government often has broad
discretion to deny a permit that is worth far more than property
it would like to take,” making “land-use permit applicants . . .
especially vulnerable to the type of coercion that the
unconstitutional conditions doctrine prohibits,” and (2) “many
proposed land uses threaten to impose costs on the public that
dedications of property can offset.” Koontz, 570 U.S. at 604–
05. Plainly, the realities of land-use permitting have no bearing
on Medicare contracts. We therefore decline the Companies’

35
invitation to subject the Program to scrutiny under Nollan-
Dolan.21

* * *

In effect, the Companies argue that they have a

constitutionally protected right to be reimbursed for their
products at price levels they have historically enjoyed. From
the creation of Part D until the creation of the Program, those
prices were set by a market in which the government (far and
away the largest buyer) did not use its purchasing power to
negotiate. In AstraZeneca, we noted that, for purposes of the
Fifth Amendment’s guarantee of procedural due process,
“[t]here is no protected property interest in selling goods to
Medicare beneficiaries (through sponsors or pharmacy benefit
plans) at a price higher than what the government is willing to
pay when it reimburses those costs.” 137 F.4th at 125–26.
This logic applies with equal force in the context of the Fifth

21
Even if an adaptation of the Nollan-Dolan test applied here,
the Program would withstand scrutiny. In the Companies’
view, a condition on a voluntary government benefit that takes
property from the recipient must (1) have a nexus to the
government program, and (2) be proportional to the benefit
conferred. Here, the Program has the required nexus to
Medicare. Requiring the Companies to make selected drugs
available to Medicare beneficiaries at negotiated prices
supports the government’s aim to provide greater access to
affordable prescription drugs. And the Program’s putative
taking of property is proportional to the benefit conferred. In
exchange for reduced profits from selected drugs, each
company is able to obtain Medicare reimbursements for
numerous products that it manufactures.

36
Amendment’s Takings Clause. The Companies face a choice:
forgo participation in certain Medicare and Medicaid programs
or accept federal reimbursements for selected drugs on less
lucrative terms. Economic realities may provide a strong
incentive for a manufacturer to choose the latter. But this
choice is not a taking.

IV

The Companies next claim that CMS’s form Agreement

and Addendum compel speech in violation of the First
Amendment. They object to these documents’ use of the term
“maximum fair price,” arguing that the phrase suggests that the
Companies previously were not charging fair prices for their
drugs. They also object to these documents’ use of the terms
“agree” and “negotiate” to describe their participation in the
Program. The Companies argue that these terms mask that
they are acting under duress.

The First Amendment claim fails for two independent

reasons: (1) The Program permissibly regulates conduct, with
only an incidental effect on speech, and (2) participation in the
Program is voluntary, so the Companies are not compelled to
speak at all. The Program also does not place unconstitutional
conditions on participation because it does not regulate or
compel speech outside of the contracts needed to effectuate the
Program itself.

“The First Amendment does not prevent restrictions

directed at commerce or conduct from imposing incidental

37
burdens on speech.” Nat’l Inst. of Fam. & Life Advocs. v.
Becerra, 585 U.S. 755, 769 (2018) (“NIFLA”) (alteration
omitted) (quoting Sorrell v. IMS Health Inc., 564 U.S. 552, 567
(2011)). In other words, a law may permissibly restrict or
compel speech if the “effect on speech [is] only incidental to
its primary effect on conduct.” Expressions Hair Design v.
Schneiderman, 581 U.S. 37, 47 (2017).

“While drawing the line between speech and conduct

can be difficult, [courts] have long drawn it . . . .” NIFLA, 585
U.S. at 769. We must do so because many government actions
impose some ancillary burden on speech that is unrelated to
any suppression of ideas or creation of a government-approved
orthodoxy, thus posing no First Amendment problems. See
Sorrell, 564 U.S. at 567 (noting that, e.g., “a ban on race-based
hiring may require employers to remove ‘White Applicants
Only’ signs, . . . an ordinance against outdoor fires might forbid
burning a flag, and . . . antitrust laws can prohibit agreements
in restraint of trade” because these government actions have
only incidental effects on speech (cleaned up)); see also, e.g.,
Zauderer v. Off. of Disciplinary Couns. of Sup. Ct. of Ohio, 471
U.S. 626, 651 (1985) (allowing states to mandate that
professionals make specific disclosures so long as they are not
“unjustified or unduly burdensome”); United States v. O’Brien,
391 U.S. 367, 382 (1968) (holding that, despite the
communicative aspect of burning a draft card, a conviction
based on the “noncommunicative impact of [the defendant’s]
conduct” was permissible).

For example, in Rumsfeld v. Forum for Academic &

Institutional Rights, Inc., 547 U.S. 47 (2006) (“FAIR”), the
Supreme Court rejected a First Amendment challenge to the
Solomon Amendment—a statute that required schools
receiving certain federal grants to host military recruiters on

38
the same terms as other employers. A group of law schools
opposed to a military policy argued that the Solomon
Amendment compelled them to speak by requiring them to
accommodate the military recruiters’ messages and distribute
notices on the recruiters’ behalf. Id. at 53, 61–62. The
compelled messages were statements of fact such as “The U.S.
Army recruiter will meet interested students in Room 123 at
11 a.m.” Id. at 61–62. The Court held that the compelled
speech the schools complained of was subject to First
Amendment scrutiny but was “plainly incidental to the
Solomon Amendment’s regulation of conduct”—i.e., the
hosting of military recruiters on campus. Id. at 62. It explained
that compelling schools to send scheduling emails and post
notices on behalf of military recruiters is a far cry from “a
Government-mandated pledge or motto that the school must
endorse.” Id.22 And it reiterated that “it has never been deemed
an abridgment of freedom of speech or press to make a course
of conduct illegal merely because the conduct was in part
initiated, evidenced, or carried out by means of language,
either spoken, written, or printed.” Id. (quoting Giboney v.
Empire Storage & Ice Co., 336 U.S. 490, 502 (1949)).

By contrast, in Expressions Hair Design, the Supreme

Court concluded that a state law related to credit card
surcharges was a regulation of speech. 581 U.S. at 40, 47–48.
The law permitted merchants to charge customers using cash
less than customers using credit cards, but it also regulated
what a merchant could call this differential pricing: referring

22
The Court also noted that the Solomon Amendment only
compels speech “if, and to the extent, the school provides such
speech for other recruiters.” 547 U.S. at 62. See infra Section
IV.B.

39
to it as a “cash discount” was permissible, while calling it a
“credit card surcharge” was not. See id. at 44. Therefore, the
Court held that the law “regulat[ed] the communication of
prices rather than prices themselves” making it subject to First
Amendment scrutiny. Id. at 48. Because the law allowed
merchants to charge whatever they wanted, it regulated only
speech, not conduct. Id. at 47. Such a regulation could not be
said to have an “incidental” effect on conduct.

II

Applying these principles to the Program, we have no

trouble concluding that the Program is directed at conduct.
When Congress enacted the IRA, it required CMS to negotiate
the prices at which Medicare will reimburse manufacturers for
selected drugs. To comply with this mandate, CMS must
follow the statute’s process for the exchange of offers and
counteroffers with a manufacturer. That process is outlined in
a contract governing the negotiation: the Agreement. And
when the parties agree to a price, they memorialize it in a
contract governing how much money CMS will tender and the
manufacturer will accept as reimbursement for covered drugs:
the Addendum.

When a manufacturer signs the Agreement or the

Addendum, it engages in speech entitled to some form of
constitutional scrutiny. After all, the legal effect of signing a
contract does not deprive the signing of its expressive
component. Doe No. 1 v. Reed, 561 U.S. 186, 195 (2010); see
also Greater Phila. Chamber of Com. v. City of Philadelphia,
949 F.3d 116, 135 (3d Cir. 2020) (noting “the well settled
proposition” that negotiating contract terms “is speech subject
to the protections of the First Amendment”). But any First

40
Amendment speech contained in those contracts is incidental
to the contracts’ regulation of conduct.23

23
The dissent contends that FAIR establishes that, even if the
Program primarily regulates conduct, we must ask whether any
incidentally compelled speech is expressive. See Dissent at
33–34. But all speech is expressive. That is why the Supreme
Court only discussed the “inherently expressive” nature of
conduct (not speech) in FAIR. See 547 U.S. at 64–68. In its
separate assessment of whether the Solomon Amendment’s
compelled verbal statements were unconstitutional, the Court
looked to whether the law compelled statements of opinion or
of fact. Id. at 61–62. And although First Amendment scrutiny
applies to both, the factual statements about recruiting that the
law schools were required to make were “a far cry” from the
“Government-mandated pledge or motto” at issue in landmark
compelled speech cases. Id. (citing West Virginia Bd. of Educ.
v. Barnette, 319 U.S. 624 (1943), and Wooley v. Maynard, 430
U.S. 705 (1977)). The lack of ideological weight supported the
Court’s conclusion that any speech compulsion was “plainly
incidental” to the Solomon Amendment’s regulation of
conduct. Id. at 62. The Court then independently considered
whether the conduct of hosting recruiters had an inherently
expressive quality and whether accommodating a military
recruiter would interfere with the schools’ speech. Id. at 64.
The answer to both questions was no, as “[n]othing about
recruiting suggests that law schools agree with any speech by
recruiters,” military or otherwise, and the equal-access
mandate did not restrict the law schools’ speech. Id. at 65.

41
 Although the Companies view the contracts’ use of the
term “maximum fair price” as normative, the Agreement
expressly states that the parties intend to give all statutorily-
defined terms their statutory meaning, not their colloquial
meaning. And the statutory meaning of “maximum fair price”
is, in essence, the agreed-upon price for a selected drug during
a specified pricing period. See 42 U.S.C. § 1320f(c)(3)
(defining the term). We must construe the term as defined in
the IRA, without reference to how “it might be read by a
layman, or as it might be understood by someone who has not
even read [the statute].” Meese v. Keene, 481 U.S. 465, 484–
85 (1987). When we do, the term loses the expressive weight
the Companies place on it. Cf. Engelhard Corp. v. NLRB, 437
F.3d 374, 381 (3d Cir. 2006) (citing the “well established
principle[] of contract construction [] to read . . . all provisions
of a contract together as a harmonious whole”).

The Companies also argue that, because they have a

strong economic incentive to participate in in the Program,
they are not truly negotiating or freely agreeing to the process
or a drug price. As with the term “maximum fair price,” the
IRA uses the terms “agree” and “negotiate” to describe the
parties’ dealings in the Program. E.g., 42 U.S.C. §§ 1320f-
2(a)(1), 1320f-3(a), 1320f-3(b)(2)(F). Indeed, it is difficult to

Here, the Program regulates the price at which the companies

will be reimbursed for their products. The challenged contracts
are an ancillary part of a government reimbursement process
and do nothing to limit the Companies’ speech about the
Program. More to the point, notwithstanding the Companies’
subjective views of the contractual terms, nothing about
signing the Agreement or Addendum suggests that the
Companies hold any particular view.

42
imagine how any contract could effectuate the Program
without using the terms “agree” or “negotiate,” or equivalents
that would draw the same objections from the Companies.24
This is strong evidence that the objected-to terms regulate
conduct, despite their presence in written instruments.

In essence, the Companies complain about contract

terms they dislike but do not have the bargaining power to
convince CMS to remove. But the terms of the contracts are
meant to effectuate the Program, not to force the Companies to
endorse a government-mandated message. See FAIR, 547 U.S.
at 62. Notably, the Companies also remain free to criticize the
Program outside of the contracts used to effectuate it. See id.
at 60 (“Law schools remain free under the statute to express
whatever views they may have . . . all the while retaining
eligibility for federal funds.”); id. at 65 (“[N]othing in the
Solomon Amendment restricts what the law schools may say
about the military’s policies.”).25

24
Although the Companies claim they were coerced into
signing the contracts, agreements between parties with unequal
bargaining power remain agreements. Cf. AT&T Mobility LLC
v. Concepcion, 563 U.S. 333, 346 n.5 (2011) (explaining that
agreements to arbitrate made between parties with “unequal
bargaining power” are enforceable). And it is common for
purchasers to negotiate with a ceiling on what they are willing
to pay, as CMS does here because of the statutory price cap.
See 42 U.S.C. § 1320f-3(c).
25
Separately, Janssen argues that its “forced participation in
the Program” is an independent First Amendment violation:

43
 Because the Program regulates conduct, with only an
incidental effect on speech, it withstands First Amendment
scrutiny.26

The Companies’ First Amendment challenge also fails

because the Program only “compels” them to speak if they
choose to participate. As with their takings claims, the
economic hardship that would result from declining to

compelled expressive conduct. Janssen Br. 44–46. It is not.

As discussed throughout this opinion, Janssen is not forced to
participate in the Program. Furthermore, Janssen has not
shown that observers are likely to understand the company’s
participation in the Program communicates something about its
beliefs. See Tenafly Eruv Ass’n, Inc. v. Borough of Tenafly,
309 F.3d 144, 161 (3d Cir. 2002).
26
Arguably, the introductory paragraphs (i.e., the “recitals”) to
a contract do not directly regulate conduct in the way the
operative terms of a contract do. Thus, when government
contracts regulate conduct, the recitals and operative terms
could have different First Amendment implications. However,
the recitals to the Agreement merely provide factual context
for the Program: They state that a manufacturer and CMS will
“negotiate to determine a price (referred to as “maximum fair
price” in the [IRA]) for selected drugs.” Agreement at 1. Thus,
like the operative terms of the Agreement, any burden on
speech that the recitals impose is incidental to the Program’s
regulation of conduct.

44
participate in the Program does not amount to unconstitutional
compulsion.27

“A violation of the First Amendment right against

compelled speech occurs only in the context of actual
compulsion, although that compulsion need not be a direct
threat.” Miller v. Mitchell, 598 F.3d 139, 152 (3d Cir. 2010)
(internal quotation marks omitted). “In order to compel the
exercise of speech, the governmental measure must punish, or
threaten to punish, protected speech by governmental action
that is regulatory, proscriptive, or compulsory in nature.” C.N.
v. Ridgewood Bd. of Educ., 430 F.3d 159, 189 (3d Cir. 2005)
(cleaned up). For instance, a state government compels speech
when a prosecutor promises to criminally charge high school
students unless they write essays about how “sexting” is
wrong. Miller, 598 F.3d at 143–44, 152. But a school district
does not compel speech when it seeks to collect information

27
As discussed above, we join our sister Circuits in holding
that Medicare participation is voluntary for purposes of the
Takings Clause. See supra Section III.A.I. It is unclear if the
level of compulsion required to violate the First Amendment
differs from the level of compulsion needed to violate other
constitutional provisions and, if so, to what extent. Cf.
Newman v. Beard, 617 F.3d 775, 780 (3d Cir. 2010). In the
absence of clearer authority, our holding with respect to
takings liability counsels against finding compulsion for
purposes of the First Amendment.

45
from students without threatening punishment or discipline for
failure to respond. C.N., 430 F.3d at 189.28

Here, the government does not threaten to punish the

Companies for declining to participate in the Program.
Although the Companies will lose certain revenues from
Medicare and Medicaid if they decide not to participate in the
Program, Congress can permissibly leverage funding in this
way.29 In FAIR, the Solomon Amendment stated that that if
any part of a university denied military recruiters access equal
to that provided other recruiters, the entire university—not just
the particular school that denied access—would lose federal
funds from multiple government departments. 547 U.S. at 51,
54 n.3. Despite these major funding consequences, universities
who disagreed with the Solomon Amendment’s condition
remained “free to decline the federal funds” that subjected
them to the condition. Id. at 59; cf. Wooley v. Maynard, 430
U.S. 705, 715 (1977) (finding a state “in effect require[d]”
speech by mandating that drivers display a motto on their

28
While the First Amendment “right to refrain from speaking
at all . . . is necessarily different in the public school setting,”
it still includes the right not to “profess beliefs or views with
which the student does not agree.” C.N., 430 F.3d at 186–87
(citation omitted).
29
The Companies argue that the IRA improperly leverages
Medicare funding for drugs covered by the Program. This
framing artificially cleaves off drugs selected for negotiation
from the rest of Medicare. There is one Medicare funding
stream, and the Program sets conditions on a portion of it.

46
license plates, because driving is “a virtual necessity”). There
was no unconstitutional compulsion. The same is true here.30

The Companies voluntarily chose to participate in the

Program. Any ancillary speech component inherent in
Program participation was therefore not compelled. For this
additional reason, their First Amendment claims fail.

The Companies argue in the alternative that even if the

Program does not directly violate the First Amendment, it
imposes an unconstitutional condition on a voluntary
government benefit. This argument fails, because any speech
compulsion does not reach outside of the contours of the
Program.

Generally, when a party complains that a government

benefit comes on objectionable terms, the party’s remedy is to
forego the benefit. See Agency for Int’l Dev. v. All. for Open
Soc’y Int’l, Inc., 570 U.S. 205, 214 (2013) (“AID”) (“As a
general matter, if a party objects to a condition on the receipt
of federal funding, its recourse is to decline the funds . . . [even
when] a condition may affect the recipient’s exercise of its First
Amendment rights.”). That said, a funding condition that
reaches beyond the scope of the program to compel or regulate
a funding recipient’s speech may violate the First Amendment.
Id. at 215–16.

30
The IRA’s excise tax provisions do not change this
conclusion, as they only apply after a manufacturer chooses to
participate in the Program. See supra note 11.

47
 In AID, the Supreme Court distinguished between two
types of conditions of federal funding that burden First
Amendment rights: (1) those “that define the limits of the
government spending program . . . [by] specify[ing] the
activities Congress wants to subsidize,” and (2) those “that
seek to leverage funding to regulate speech outside the
contours of the program itself.” Id. at 214–15. The former
conditions are permissible while the latter are not.

The condition at issue in AID required organizations

receiving federal funds related to HIV/AIDS prevention to
certify in their award documents that they have policy of
opposing prostitution and sex trafficking. Id. at 210. The
Court held that the certification requirement regulated speech
outside of the HIV/AIDS prevention program for two reasons.
First, it was unnecessary; a separate provision barred funds
from being used to promote or advocate prostitution. Id. at
217–18. Second, it was overbroad; it limited the organization’s
First Amendment activity conducted “on its own time and
dime.” Id. at 218. Similarly, in FCC v. League of Women
Voters of California, federal funding conditioned on television
and radio stations not “engag[ing] in editorializing” violated
the First Amendment because the stations were “barred
absolutely from all editorializing,” not just when using the
federal funds. 468 U.S. 364, 366, 400 (1984) (citation
omitted). But there was no First Amendment violation in Rust
v. Sullivan, where a condition barring federal funds from being
used on family planning programs that included abortion
“le[ft] the grantee unfettered in its . . . activities” outside of the
funded program. 500 U.S. 173, 196 (1991); see also Speiser v.
Randall, 357 U.S. 513 (1958) (striking down requirement that
applicants for a tax exemption attest that they do not seek to
overthrow the United States government by unlawful means).

48
 Finally, in Regan v. Taxation With Representation of
Washington, 461 U.S. 540 (1983), the Supreme Court held that
a federal ban on lobbying by tax-exempt non-profit
organizations was permissible under the First Amendment.
There, organizations with favorable treatment under 26 U.S.C.
§ 501(c)(3) received a government benefit—tax exemptions
for the organization and tax deductions for contributors—on
the condition that they forgo political advocacy. Id. at 542 &
n.1. This condition was permissible, in part because the
organizations could organize a lobbying affiliate under 26
U.S.C. § 501(c)(4), which grants tax exemptions but not tax
deductions for contributors. Id. at 544–45 & n.6. In short, the
restriction on funds, offered in the form of favorable tax
treatment, survived First Amendment scrutiny because it
reflected Congress’ choice of what activities to subsidize and
permitted participants to engage in protected activity on their
own time and dime. See id. at 545.

These cases establish that the Program does not impose

an unconstitutional condition on participation. Any
“compelled” speech is squarely within the scope of the
Program because the contracts at issue effectuate the drug price
negotiation process established by Congress. Any expressive
content in the contracts—including statements that the parties
are agreeing to negotiate a price, and that that price is referred
to as the “maximum fair price” in the IRA—effectuates the
government’s policy choices, rather than “leverage[s] funding
to regulate speech outside the contours of the program itself.”
AID, 570 U.S. at 214–15; cf. Sheetz, 601 U.S. at 275–76.

Moreover, the Program does not limit or compel speech

outside of the contractual documents any company must sign
to participate in the Program. The Companies remain free to
criticize the Program in any forum or instrument other than the

49
contracts needed to effectuate the Program. See Rust, 500 U.S.
at 197 (“[U]nconstitutional conditions . . . involve situations in
which the Government has placed a condition on the recipient
of the subsidy rather than on a particular program or
service . . . .” (internal quotation marks omitted)).

* * *

For the foregoing reasons, we will affirm the District

Court’s orders granting summary judgment to the government.

50
 Bristol Myers Squibb Co. v. Sec’y HHS & Janssen Pharms.
Inc. v. Sec’y HHS, Nos. 24-1820 & 24-1821
______________

HARDIMAN, Circuit Judge, dissenting.

These consolidated appeals pit two large

pharmaceutical manufacturers—Bristol Myers Squibb (BMS)
and Janssen Pharmaceuticals (collectively, the Companies)—
against the federal government. The Companies appeal adverse
summary judgments. They contend that the District Court erred
when it rejected their constitutional challenges to the Inflation
Reduction Act of 2022 (the Act). The Act established a “Drug
Price Negotiation Program” (the Program) to reduce
skyrocketing expenses. The Program directs the Department of
Health and Human Services (HHS)—through the Centers for
Medicare and Medicaid Services (CMS)—to “negotiate”
prices with drug manufacturers. See 42 U.S.C. § 1320f(a)(3).

The Companies contend that the Program takes their

property without just compensation in violation of the Fifth
Amendment and compels them to speak in violation of the First
Amendment. This Court rejects these arguments and affirms
the District Court. I see things differently. The Companies have
persuasively argued that their constitutional rights were
violated and that they are entitled to invalidation of the
Program as applied to them.

Begin with some general principles. The federal

government now accounts for almost half of all spending on
prescription drugs—some $200 billion per year. See Sanofi
Aventis U.S. LLC v. HHS, 58 F.4th 696, 699 (3d Cir. 2023);
KFF, 10 Prescription Drugs Accounted for $48 Billion in
Medicare Part D Spending in 2021, or More Than One-Fifth
of Part D Spending That Year (July 12, 2023),
https://perma.cc/76RC-DDJR. As a dominant market
participant, the United States can do business with whomever
it wishes, and it may offer whatever prices it deems proper. So
businesses—including pharmaceutical companies like BMS
and Janssen—have no constitutional right to sell their wares to
the federal government or its designated beneficiaries. And
counsel for both sides agree that Congress could have sought
to reduce federal outlays simply by passing a law setting prices
for the costliest Medicare drugs.

Instead, the Act compelled the Companies to participate

in the Program by threatening them with unavoidable,
enterprise-crippling tax liabilities if they refused to sell drugs
at prices set by CMS (an arm of the Executive Branch).
Because the Companies could not avoid participating in the
Program without paying those taxes, I would hold that the Act
effects a taking of their property under the Fifth Amendment
and compels them to speak in violation of the First
Amendment. So I would reverse and remand.

II

The Program at issue targets Medicare Parts B and D.

See AstraZeneca Pharms. LP v. Sec’y U.S. Dep’t of HHS, 137
F.4th 116, 120 (3d Cir. 2025). When Congress enacted Part D
in 2003, it prohibited CMS from “interfer[ing] with the
negotiations between drug manufacturers and pharmacies
and . . . sponsors” and from “institut[ing] a price structure for
the reimbursement of covered part D drugs.” 42 U.S.C.
§ 1395w-111(i)(1), (3) (2003). Almost twenty years later,
however, the Act created an exception, directing CMS to

2
“negotiate . . . maximum fair prices” for certain drugs, id.
§ 1320f(a)(3), subject to price ceilings derived from a
benchmark market-based price, id. § 1320f-3(c). A “selected
drug’s ‘maximum fair price’ applies beginning in a given drug-
pricing period (a period of one calendar year), the first of which
is 2026, until the drug is no longer eligible for negotiation or
the price is renegotiated.” AstraZeneca, 137 F.4th at 120
(citing 42 U.S.C. § 1320f(b)(1)–(2), 1320f–1(c), 1320f–3(f)).

The Act required CMS to select ten drugs for the first
drug-pricing period. See 42 U.S.C. §§ 1320f(d) and 1320f–
1(a). As the Program ramps up, CMS must select 15 more
drugs per year for the 2027 and 2028 drug-pricing periods and
up to 20 more drugs per year for 2029 and subsequent drug-
pricing periods. See id. § 1320f–1(a). The selected drugs must
have accounted for the largest costs for Medicare that prior
year. See id. § 1320f–1(b)(1)(A). A selected drug remains in
the Program until CMS determines that a generic or biosimilar
version of the drug has been approved and is being marketed.
See id. §§ 1320f–1(c)(1), 1320f–2(b).

When CMS selects a drug for the Program, its

manufacturer must “enter into [an] agreement[]” to “negotiate
. . . a maximum fair price for such selected drug.” Id. § 1320f–
2(a)(1). For the first round of selections, the manufacturer of a
selected drug had until October 1, 2023, to enter an agreement
obligating it to “negotiate” a “maximum fair price” for the drug
(hereinafter, the Agreement). See id. § 1320f(b)(4), (d)(2)(A).

CMS drafted the Agreement that manufacturers must

sign to comply with this “negotiation” obligation. See CMS,
Medicare Drug Price Negotiation Program Agreement,
https://perma.cc/ZC3E-XCQ5 (last visited June 20, 2025), at
1–6 (Agreement). The Agreement states that “CMS and the

3
Manufacturer agree” that they “shall negotiate to determine
(and, by not later than the last date of [the negotiation] period,
agree to) a maximum fair price for the Selected Drug.”
Agreement at 2; see also 42 U.S.C. § 1320f–2(a)(1).

Once a manufacturer signs the Agreement, the agency

makes a “written initial offer.” 42 U.S.C. § 1320f–3(b)(2)(B).
The agency must issue the offer by a statutory deadline,
propose a “maximum fair price,” and include a concise
justification for the offer based on statutory criteria. Id. The
manufacturer then has 30 days to accept the offer or make a
counteroffer. See id. § 1320f–3(b)(2)(C). CMS must respond
in writing to any counteroffer. See id. § 1320f–3(b)(2)(D).

“Negotiations” for the first round of selections were to

end by August 1, 2024. See id. §§ 1320f(b)(4), (d)(2)(B),
(d)(5)(C) and 1320f–3(b)(2)(E). Before that deadline, the
manufacturer had to “respond in writing” to the agency “by
either accepting or rejecting the final offer.” CMS, Medicare
Drug Price Negotiation Program: Revised Guidance,
Implementation of Sections 1191-1198 of the Social Security
Act for Initial Price Applicability Year 2026, at 158 (June 30,
2023) (2023 Revised Guidance), https://perma.cc/AV2Z-
4F9U. The agency and manufacturers must follow a similar
process for future drug-pricing periods, except the deadlines
will be set for different times of the calendar year. See id.
§ 1320f–3(b)(2).

The Act sets a price ceiling for selected drugs that CMS
cannot exceed when it makes a manufacturer an offer. Id.
§ 1320f–3(c)(1)(A). And it requires CMS to “aim[] to achieve
the lowest maximum fair price for each selected drug,” id.
§ 1320f–3(b)(1), not to exceed 75 percent of a benchmark
based on private market prices for the drug, id. § 1320f–

4
3(b)(2)(F), (c)(1)(C), (c)(3)–(5). Lower price ceilings (65 or 40
percent) apply to drugs that have been approved for a longer
time (at least 12 or 16 years, respectively). Id. There is no price
floor, but the offer must be “justified” based on certain factors
identified in the statute. Id. § 1320f–3(b)(2)(B),
(b)(2)(C)(ii)(II), (e). The Act forecloses judicial review of,
among other things, CMS’s pricing decisions, selection of
drugs, and determinations about which drugs are eligible for
selection. See id. § 1320f–7.

In addition to the Agreement, CMS created an

addendum a manufacturer must sign to participate in the
Program (hereinafter, the Addendum). See Agreement at 7–9.
The Addendum states that “[t]he parties agree to a price of [$
],” which the Addendum’s recitals note is called a “maximum
fair price” in the statute. Agreement at 7. Once the process is
completed, the Act directs CMS to publish the “maximum fair
price” that it “negotiated with the manufacturer” and its
“explanation” for the price. 42 U.S.C. § 1320f–4(a).

The Agreement obliges the manufacturer to “provide

access to such price” to Medicare beneficiaries beginning in
2026 for the first round of ten drugs. Agreement at 2; 42 U.S.C.
§ 1320f–2(a)(1). Failure to do so triggers a civil monetary
penalty of ten times the difference between the price charged
and the maximum fair price for every unit sold. 42 U.S.C.
§ 1320f–6(a). An offending manufacturer also will be subject
to a civil monetary penalty of $1,000,000 for each day the
Agreement was violated. Id. § 1320f–6(c).

Once CMS includes a drug in the Program, the

manufacturer can theoretically walk away and choose not to do
business with the government. But a manufacturer that does so
must pay a daily excise tax that begins at 185.71 percent and

5
rises to 1,900 percent of the selected drug’s total daily revenues
from all domestic sales.1 See 26 U.S.C. § 5000D. The
Congressional Budget Office observed that “[t]he combination
of that excise tax and corporate income taxes could exceed a
manufacturer’s profits from that product.” Congressional
Budget Office, How CBO Estimated the Budgetary Impact of
Key Prescription Drug Provisions in the 2022 Reconciliation
Act, at 9 (February 17, 2023), https://perma.cc/Y74A-ATLS
and https://perma.cc/2WVR-47TS. Indeed, the excise tax
would be so confiscatory that Congress’s Joint Committee on
Taxation projected that a nearly identical excise tax provision
in a precursor bill would raise “no revenue.” Joint Comm. on
Tax’n, Estimated Budget Effects of the Revenue Provisions of
Title XIII—Committee On Ways And Means, of H.R. 5376,

1
The Government downplays the excise tax rate, contending
that it ranges from 65 to 95 percent. But those percentages refer
to the tax-inclusive rate—what the Act calls the “applicable
percentage,” 26 U.S.C. § 5000D(a), (d)—instead of the tax-
exclusive rate—the ordinary way to express an excise tax rate.
See, e.g., Imposition and Calculation of the Manufacturers
Excise Tax on Sales of Designated Drugs, [2025] Fed. Tax
Coordinator 2d (RIA) ¶ W-6603, 2022 WL 10409574 (Mar.
12, 2025). A tax-inclusive rate calculates the tax as a
percentage of the total sale price plus the tax, while the tax-
exclusive rate calculates the tax as a percentage of the pre-tax
price alone. The tax-exclusive rate is what matters to taxpayers
because it reflects the actual burden of the tax relative to
earnings per sale. There is no dispute that the tax-exclusive rate
ranges from 185.71 to 1,900 percent. See 26 U.S.C.
§ 5000D(a), (d); Molly F. Sherlock et al., Cong. Rsch. Serv.,
R47202, Tax Provisions in the Inflation Reduction Act of 2022
(H.R. 5376) 4 (2022), https://perma.cc/2XPR-G7NL.

6
Fiscal Years 2022-2031, at 8 (Nov. 19, 2021),
https://perma.cc/SMC3-GZMF (calculating the excise tax in
Build Back Better Act, H.R. 5376, 117th Cong. § 139002 (1st
Sess. 2021) (as passed by the House of Representatives, Nov.
19, 2021)). To state the obvious, Congress knew that no
manufacturer would ever be able to pay this tax.

But is there an escape hatch from this confiscatory tax?

My colleagues think so, reasoning that a manufacturer can
decline to participate in the Program by terminating Medicare
and Medicaid coverage of all its products. See 26 U.S.C.
§ 5000D(c). A manufacturer can cause the excise tax to be
“suspend[ed]” by terminating its extant Medicare and
Medicaid agreements (under the Medicare Coverage Gap
Discount Program, the Manufacturer Discount Program, and
the Medicaid Drug Rebate Program). See id.

There is a practical problem that made this exit option

illusory, however. Because nearly all large manufacturers
(including BMS and Janssen) once participated in the
Coverage Gap Discount Program and now participate in the
Manufacturer Discount Program, they will be subject to the
excise tax if they refuse to participate in the Program. A
manufacturer that terminates its Medicare Coverage Gap and
Discount Program agreements must wait between 11 and 23
months, depending on when the notice is given in a calendar
year, before the termination becomes effective. See 42 U.S.C.
§§ 1395w-114a(b)(4)(B)(ii), 1395w-114c(b)(4)(B)(ii). Thus,
to avoid being subject to the Program’s excise tax for refusing
to sign an Agreement by October 1, 2023, a manufacturer

7
would have had to accomplish the impossible: provide notices
of termination by January 29, 2022, before the Act became law.

III

BMS’s drug Eliquis and Janssen’s drug Xarelto were

among the first ten drugs selected for the Program by CMS.
Both manufacturers signed the necessary Agreements by the
October 1, 2023, deadline. And both signed the Addendum
setting a “maximum fair price” by the August 1, 2024,
deadline.2

BMS submitted evidence to the District Court that if it

had refused to sign the Agreement, the excise tax on sales of
Eliquis would have been hundreds of millions of dollars on the
first day after the deadline and would have soon exceeded one
billion dollars per day. App. 87. Janssen likewise submitted
evidence that the excise tax on sales of Xarelto would have
started at over $50 million per day and escalated to more than
$600 million per day, likely exceeding $90 billion in the first

2
According to CMS, the list price for a 30-day supply of
Eliquis was $521.00 in 2023. See CMS, Medicare Drug Price
Negotiation Program: Negotiated Prices for Initial Price
Applicability Year 2026 (Aug. 15, 2024),
https://www.cms.gov/newsroom/fact-sheets/medicare-drug-
price-negotiation-program-negotiated-prices-initial-price-
applicability-year-2026. The price set by the Program is
$231.00, which represents a 56 percent discount. Id. The list
price for a 30-day supply of Xarelto was $517.00 in 2023. Id.
The price set by the Program is $197.00, which represents a 62
percent discount. Id.

8
year. App. 795–96. The Government has not disputed these
calculations.

IV

Having described the complexities of the Program, I

turn to the Companies’ constitutional arguments.

Consider first the Takings Clause argument. The Fifth

Amendment provides: “nor shall private property be taken for
public use, without just compensation.” U.S. Const. amend. V.
“[A] physical appropriation of property [gives] rise to a per se
taking, without regard to other factors.” Horne v. Dep’t of
Agric., 576 U.S. 350, 360 (2015). That is true for physical
appropriations of real and personal property. Id. An owner of
personal property has the “rights to possess, use, and dispose
of” it. Id. at 361–62 (citation omitted). So the Companies have
a right to decline to sell the doses of their drugs that sit in
warehouses to Medicare beneficiaries.

In Horne, the Supreme Court recognized that a reserve

requirement for raisin growers imposed “a clear physical
taking” because it forced them to turn over possession of a
percentage of their raisin crop to the government. Id. at 361.
Like that reserve requirement, here the Act imposes a clear
physical taking by forcing the Companies to turn over physical
doses of Eliquis and Xarelto to Medicare beneficiaries at
certain prices.

The Act forces the Companies to turn over their

property to Medicare beneficiaries by threatening them with
ruinous excise tax liability. Although participation in Medicare

9
and Medicaid is voluntary, participation in the Program is not.
If a Medicare provider declines to participate in the Program,
the Act imposes an unavoidable tax on all sales of its selected
drug, including sales outside the Medicare system. See 26
U.S.C. § 5000D(a). That extraordinary threat compels
manufacturers to turn over their drugs at prices set by CMS.
See Horne v. Dep’t of Agric., 569 U.S. 513, 523–24 & n.4
(2013) (Horne I); cf. E. Enters. v. Apfel, 524 U.S. 498, 529
(1998) (plurality opinion). The Act’s threat of excise taxes and
civil penalties looms like a sword of Damocles, creating a de
facto mandate to participate.3

As it did in Horne, the Government identifies

theoretical options a manufacturer has to avoid the taking of
property. For example, the Government suggests that
manufacturers can divest their interests in selected drugs. But
the Court’s decision in Horne forecloses that argument because
the growers there could have divested their property interests
as well. See 576 U.S. at 365. The Government also contends
that the Companies have the “option” to refuse to participate in
the Program, continue selling their drugs to Medicare
beneficiaries, and pay the excise tax. Once again, Horne
3
The majority cites cases rejecting the argument that
participation in Medicare is involuntary because foregoing
participation would hurt providers’ profits. See Majority Op.
Section III-A-I & n.10. I agree that declining profitability does
not raise a constitutional problem, but in none of those cases
did the government threaten to impose major financial
penalties on providers if they declined to participate in
Medicare. So their reasoning has little bearing on the key issue
here, which is whether manufacturers can avoid the excise tax
if they decline to participate in the Program.

10
rejected the argument that a property owner’s “option” to pay
a major financial penalty is relevant to determine whether the
government has taken property under the Fifth Amendment.4
See Horne I, 569 U.S. at 523–24 & n.4; cf. Cedar Point
Nursery v. Hassid, 594 U.S. 139, 144 (2021).

The Government offers several reasons why the excise

tax did not compel the Companies to participate in the
Program. Those arguments are unavailing because they are
based on efforts by CMS and the IRS to rewrite the statute, as
the majority does in its opinion. But administrative agencies
(and courts) lack the power to amend laws enacted by
Congress. See Loper Bright Enters. v. Raimondo, 603 U.S.
369, 412–13 (2024).

The Act directs CMS to implement the Program “for

2026, 2027, and 2028 by program instruction or other forms of
program guidance.” 42 U.S.C. § 1320f note. CMS interpreted
this language to absolve it of the duty to provide notice and an
opportunity to comment to interested parties before it
promulgates legislative rules. See 2023 Revised Guidance at
8–11. Consistent with that interpretation, CMS issued
extensive guidance documents for the 2026, 2027, and 2028

4
While the Government does not advance it as an “option,” a
manufacturer could avoid incurring excise tax liability by
ceasing to sell its drug entirely, so that it never enters the
stream of commerce. But Horne rejected the argument that the
growers had the “option” to stop selling their product,
explaining that a property owner’s right to sell his goods to
private market participants is a “basic and familiar use[] of
property.” 576 U.S. at 366.

11
drug-pricing periods. See id.; CMS, Medicare Drug Price
Negotiation Program: Final Guidance, Implementation of
Sections 1191 – 1198 of the Social Security Act for Initial Price
Applicability Year 2027 and Manufacturer Effectuation of the
Maximum Fair Price in 2026 and 2027 (Oct. 2, 2024),
https://perma.cc/M59V-V2A9; CMS, Medicare Drug Price
Negotiation Program: Draft Guidance, Implementation of
Sections 1191 – 1198 of the Social Security Act for Initial Price
Applicability Year 2028 and Manufacturer Effectuation of the
Maximum Fair Price in 2026, 2027, and 2028 (May 12, 2025),
https://perma.cc/G4CW-VANR.

Citing these guidance documents, the Government has

adopted at least three new positions since the Act became law.
First, it suggests the excise tax applies to sales of a selected
drug only to Medicare beneficiaries. See BMS Dist. Ct. Dkt.
No. 38-1 at 8 (citing IRS Notice No. 2023-52, 2023-35 I.R.B.
650 (Aug. 4, 2023), https://perma.cc/A5KB-Y48X); Excise
Tax on Designated Drugs, 90 Fed. Reg. 31, 32–34 (Jan. 2,
2025). Second, the Government contends that the statutorily
prescribed exit period of 11 to 23 months is no longer effective
because CMS will allow a manufacturer to stop its sales to
Medicare and Medicaid upon just 30 days’ notice. See 2023
Revised Guidance at 120–21. Third, the Government argues a
manufacturer can avoid the excise tax simply by ceasing to sell
its selected drug to Medicare beneficiaries; it need not
terminate all sales to Medicare and Medicaid. As I shall
explain, none of these attempts to save the Act works.

The Government asserts that the excise tax applies

when a manufacturer sells a selected drug only to a Medicare

12
beneficiary. Not so. The excise tax applies to all domestic sales
of a selected drug. Here’s what the statute provides:

There is hereby imposed on the sale by the

manufacturer, producer, or importer of any
designated drug during a day described in
subsection (b) a tax in an amount such that the
applicable percentage is equal to the ratio of—
(1) such tax, divided by (2) the sum of such tax
and the price for which so sold.

26 U.S.C. § 5000D(a) (emphasis added). Rather than limiting

the tax to sales to Medicare beneficiaries, it refers only to “the
sale . . . of any designated drug” and “the price” at which those
sales occur. Id. Nor does it grant the IRS discretion to interpret
the tax as applying to sales to Medicare beneficiaries alone,
especially since that would conflict with the statutory text. See
Loper Bright, 603 U.S. at 412–13.

Adopting the Government’s reading is inappropriate for

another reason: it would render two parts of the law
superfluous. See Duncan v. Walker, 533 U.S. 167, 174 (2001)
(“It is our duty to give effect, if possible, to every clause and
word of a statute.” (citation modified)). The tax is
“suspend[ed]” once a manufacturer has completely exited the
Medicare and Medicaid markets. 26 U.S.C. § 5000D(c). If, as
the Government suggests, the tax applied to Medicare sales
alone, there would be no need to suspend the tax once a
manufacturer stopped all sales to Medicare beneficiaries.
Similarly, the tax does not apply to exports. Id. § 5000D(g).
Because Medicare is a domestic program, there would be no

13
need to exclude exports if the tax applied only to Medicare
sales.

The IRS has proposed the same interpretation of the

excise tax as the one proffered here by the Government. But
the IRS notice, issued on August 4, 2023, has no relevant
analysis. See IRS Notice No. 2023-52, at 3. In January 2025,
the IRS published a notice of proposed rulemaking announcing
that it will promulgate a rule adopting the same interpretation.
See Excise Tax on Designated Drugs, 90 Fed. Reg. 31, 32–34
(Jan. 2, 2025).

But the notice of proposed rulemaking conflicts with the

statutory text and merely emphasizes “the broader statutory
context of the Program.” Id. at 33. It suggests that “[b]ecause
the . . . tax depends substantively on, and operates only in
relation to, the Program, the scope of the Program—which
provides access to selected drugs at the negotiated prices only
to Medicare beneficiaries and their pharmacies . . .—is
reflected in the scope of the tax.” Id. at 34. The IRS’s attempt
to rewrite the statute through vague references to statutory
context is inappropriate and should have no legal effect. See
Loper Bright, 603 U.S. at 412–13. By its terms, the excise tax
applies to all domestic sales of a selected drug, including
private market sales. It’s as simple as that.

CMS has attempted to rewrite the statute in a different

way from the IRS. Tacitly acknowledging the confiscatory
penalties of the 11 to 23-month delay in withdrawal, CMS
promises in a guidance document that it will offer
manufacturers an expedited 30-day exit from the Program, the
Coverage Gap Discount Program, and the Manufacturer

14
Discount Program. CMS assures the manufacturers that this
will allow them to avoid incurring excise taxes and civil
monetary penalties. See 2023 Revised Guidance at 33–34. But
here again, the expedited exit option conflicts with the Act.
However vast the powers of CMS may be, it cannot vitiate the
requirements of a law passed by Congress.

Recall that a manufacturer could have avoided excise

tax liability only by terminating Medicare and Medicaid
coverage for all its products. The tax is “suspend[ed]” when
the manufacturer has terminated its extant Medicare or
Medicaid agreements. See 26 U.S.C. § 5000D(c). Historically,
manufacturers signed agreements to sell drugs to Medicare
under the Medicare Coverage Gap Discount Program. See 42
U.S.C. § 1395w-114a. The Act phased out that program; since
January 1, 2025, manufacturers have signed such agreements
as part of the Medicare Manufacturer Discount Program. See
42 U.S.C. § 1395w-114c. Like the Coverage Gap Discount
Program, the Manufacturer Discount Program allows a
manufacturer to unilaterally terminate an agreement for
Medicare coverage of its drug. But the manufacturer must wait
between 11 and 23 months, depending on when the notice is
given in a calendar year, before the termination becomes
effective. See 42 U.S.C. §§ 1395w-114a(b)(4)(B)(ii) and
1395w-114c(b)(4)(B)(ii).

The upshot is that the Companies could not have

declined to participate in the first year of the Program. To avoid
being subject to the excise tax on October 2, 2023, they had to
do the impossible: terminate their Medicare agreements by
January 29, 2022, months before the Act became law. And if
they had provided such notice when Eliquis and Xarelto were
selected on August 29, 2023, they would have incurred excise

15
tax liability for the 15 months between October 2, 2023, and
December 31, 2024.

Apparently recognizing this Catch-22, CMS purports to

offer the Companies a solution based on its own statutory
authority to terminate such agreements. See 2023 Revised
Guidance at 120–21. CMS is correct that Congress granted
CMS the power to unilaterally terminate Coverage Gap and
Discount Program agreements at times. The two relevant
statutory provisions state that:

The Secretary may provide for termination of an

agreement under this section for a knowing and
willful violation of the requirements of the
agreement or other good cause shown. Such
termination shall not be effective earlier than 30
days after the date of notice to the manufacturer
of such termination. The Secretary shall provide,
upon request, a manufacturer with a hearing
concerning such a termination, and such hearing
shall take place prior to the effective date of the
termination with sufficient time for such
effective date to be repealed if the Secretary
determines appropriate.

42 U.S.C. §§ 1395w-114a(b)(4)(B)(i) and 1395w-

114c(b)(4)(B)(i) (same language except stating “[t]he
Secretary shall provide for termination . . . .” (emphases
added)) (emphasis added).

Citing these provisions, CMS promised in a guidance

document for 2026 that, if a manufacturer “decide[d] not to
participate in the [] Program,” it would “facilitate an
expeditious termination of” the manufacturer’s Medicare

16
Coverage Gap Discount Program and Manufacturer Discount
Program agreements. 2023 Revised Guidance at 33. According
to CMS, that would mean that the Companies could have
“avoid[ed] incurring excise tax liability” by submitting notice
and termination requests 30 days before liability would
otherwise have begun to accrue. Id. at 33–34.

CMS purports to offer the Companies this offramp

based on its statutory authority to terminate agreements for
“other good cause shown.” 42 U.S.C. §§ 1395w-
114a(b)(4)(B)(i) and 1395w-114c(b)(4)(B)(i). It promises to
“find good cause to terminate . . . [the Companies’]
agreement(s)” if they submit to CMS: “(1) a notice of decision
not to participate in the [ ] Program; and (2) a request for
termination of . . . [their] applicable agreements under the
Medicaid Drug Rebate Program, the Medicare Coverage Gap
Discount Program, and the Manufacturer Discount Program.”
2023 Revised Guidance at 120–21.

In other words, as the Government said at oral argument

in a related case, CMS has promised to help manufacturers
avoid the excise tax whenever they claim the Program is
unconstitutional.5 All the manufacturers need to do is formally
cease doing business with Medicare and Medicaid while

5
See Novartis Pharms. Corp. v. Sec’y U.S. Dep’t of HHS, No.
24-2968, Oral Arg. at 37:15–26 (“CMS has said that your
constitutional objections to this program, we will determine
that that is good cause for you to withdraw from the statute.
That is a reasonable interpretation of the statutory phrase ‘good
cause.’”); see also id. at 37:00–39:20. But see id. at 41:10–
41:35 (“I apologize for saying that it had to be for a specific
constitutional reason . . . . All you have to do is ask.”).

17
trusting the federal government to follow through on CMS’s
promise. Cold comfort, indeed.

CMS also says it is offering an exit option to

manufacturers even if they have signed Program Agreements.
See id. at 34 (“[A]ny manufacturer that has entered into an
Agreement will retain the ability to promptly withdraw from
the program prior to the imposition of civil monetary penalties
or excise tax liability.”). To take this exit option, a
manufacturer must take the steps it would have had to take
under the expedited exit option just mentioned. See id. at 130.

CMS’s efforts to rewrite the statutory scheme by

making promises in nonbinding guidance documents should
fail for several reasons.6 First, CMS lacks authority to offer

6
CMS and the majority suggest that CMS’s guidance
implementing the Program has the force of law. Majority Op.
Section III-A-II & n.18. I disagree. A statutory note to the Act
provides that HHS “shall implement [the Program] . . . for
2026, 2027, and 2028 by program instruction or other forms of
program guidance.” 42 U.S.C. § 1320f (note). CMS claims this
note authorizes it to issue binding guidance without following
notice and comment procedures.
It is true that Congress may “expressly” authorize an
agency to conduct rulemaking without following those
procedures. 5 U.S.C. § 559; see also 42 U.S.C.
§ 1395hh(b)(2)(A) (similar). But Congress did not do so here.
The question is “whether Congress has established procedures
so clearly different from those required by the APA that it must
have intended to displace” notice-and-comment rulemaking.
Asiana Airlines v. FAA, 134 F.3d 393, 397 (D.C. Cir. 1998).

18
this expedited exit option. The statutory provisions governing
the Medicare Coverage Gap Discount Program and
Manufacturer Discount Program describe two ways a
manufacturer may exit those programs. A manufacturer may
voluntarily withdraw by providing notice and waiting 11 to 23
months for its terminations to become effective. See 42 U.S.C.
§§ 1395w-114a(b)(4)(B)(ii) and 1395w-114c(b)(4)(B)(ii). Or
CMS may remove a manufacturer for engaging in misconduct.
See 42 U.S.C. §§ 1395w-114a(b)(4)(B)(i) and 1395w-
114c(b)(4)(B)(i).

As for misconduct, CMS can terminate an agreement

“for a knowing and willful violation of the requirements of the
agreement or other good cause shown.” Id. But contrary to

The statutory note fails that test. The terms “guidance”

and “program instruction” refer to nonbinding interpretive
rules and policy statements. See, e.g., Admin. Conf. of the
U.S., Recommendation 2017-5, Agency Guidance Through
Policy Statements, 82 Fed. Reg. 61728, 61734 (Dec. 29, 2017);
see also Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96–97
(2015). And CMS can promulgate interpretive rules and policy
statements without following notice and comment procedures.
5 U.S.C. § 553(b)(A). So the statutory note’s instruction that
CMS must “implement” the Program through guidance and
program instruction does not direct CMS to take any action that
would conflict with the APA’s notice and comment
requirements. After all, it would be oxymoronic to say an
agency may promulgate legislative rules by issuing
“guidance.”
Regardless of whether CMS’s guidance is binding, it is
also inconsistent with the Act and the Medicare Act for the
reasons I explain.

19
CMS’s (and the majority’s) reading, “other good cause shown”
does not include a manufacturer’s request for termination.
That reading would require us to disregard the phrase “a
knowing and willful violation of the requirements of the
agreement,” which provides important context for the meaning
of “other good cause shown.”7 See McDonnell v. United States,
579 U.S. 550, 568–69 (2016) (“Under the familiar interpretive
canon noscitur a sociis, a word is known by the company it
keeps.” (citation modified)). In sum, the language that appears
right before “good cause” makes clear that it refers to other
forms of misconduct, not whatever CMS wishes it to mean.8

A contrary interpretation also would render the

7
The majority reasons that “a knowing and willful violation of
the requirements of the agreement” is “just one example of a
legally sufficient reason for CMS to terminate an agreement.”
Majority Op. Section III-A-II. But Congress knows how to
indicate when a concept is but one example of many. See, e.g.,
42 U.S.C. § 1320f–1(d)(3)(B) (instructing CMS to aggregate
data “across dosage forms and strengths of the drug, including
new formulations of the drug, such as an extended release
formulation” (emphasis added)). Here, the statutory text
primarily targets knowing and willful violations, while
including a catchall for similar conduct that does not quite meet
that high bar.
8
The majority contends that “good cause” is “a uniquely
flexible and capacious concept, meaning simply a legally
sufficient reason.” Majority Op. Section III-A-II (citation
omitted). But the ultimate source for that gloss is simply the
definition of “good cause” as “[a] legally sufficient reason.”
Cause, Black’s Law Dictionary (12th ed. 2024). Indeed, “good

20
voluntary termination provisions “insignificant, if not wholly
superfluous,” Walker, 533 U.S. at 174, which is particularly
inappropriate here as they are “another part of the same
statutory scheme.” Marx v. Gen. Revenue Corp., 568 U.S. 371,
386 (2013). Congress required manufacturers that provide
notice of termination of their extant Medicare and Medicaid
agreements to wait 11 to 23 months before the terminations are
effective.9 Automatically deeming such requests “good cause”
for CMS to terminate those agreements effective upon just 30
days’ notice would negate the option Congress enacted.
Indeed, at oral argument in a related case, the Government

cause” is often a “burden placed on a litigant . . . to show why

a request should be granted or an action excused.” Id. While
that standard leaves courts with some discretion, it cannot bear
the extraordinary weight the majority and the Government
place on it.
9
The majority also argues that “[t]he unforeseeable legal and
economic significance” placed by the Program on the
Companies’ extant Medicare agreements “supports CMS’s
conclusion” that it has “good cause” to terminate those
agreements to facilitate its exit option. Majority Op. Section
III-A-II. But as the majority observes, Congress passed the Act
into law after the Medicare Coverage Gap Discount Program
statute was enacted, and it replaced the termination language
for that program with nearly identical language in the
Manufacturer Discount Program statute. So although this
outcome was “unforeseeable” to the Companies, it was
precisely the scheme Congress chose to enact. The design of
its statutory scheme, standing alone, cannot constitute “good
cause” to avoid complying with the scheme.

21
struggled to explain how its reading of “good cause” would not
mean anything and everything.10

In sum, CMS may terminate extant Medicare

agreements only for knowing and willful violations or similar
misconduct. CMS lacks authority to terminate those
agreements to facilitate an expedited exit option that
contravenes the exit option already provided in the statute. See
26 U.S.C. § 5000D(c)(1)(A)(ii) (providing that the excise tax
is suspended once a manufacturer’s extant Medicare
agreements are no longer effective).

Second, even if CMS could terminate a manufacturer’s

extant Medicare agreements upon request for “good cause,” its
expedited exit option still would not allow a manufacturer to
avoid the excise tax. The Act “suspend[s]” the tax when,
among other things, “the notice of terminations of all
applicable agreements of the manufacturer have been received
by the Secretary of Health and Human Services.” 26 U.S.C.
§ 5000D(c)(1)(A)(i), (2). When a manufacturer terminates its

10
See Novartis Pharms. Corp. v. Sec’y U.S. Dep’t of HHS, No.
24-2968, Oral Arg. at 37:00–42:15. At one point, the
Government said CMS would find any constitutional objection
to the Program to be good cause. Id. at 37:15–26. At another
point, it clarified that CMS would find any objection to the
Program to be good cause and that “[a]ll [a manufacturer] ha[s]
to do is ask” for the exit option. Id. at 41:10–41:35. Yet
incongruously, “if [a manufacturer] want[s] to [exit] for other
reasons, then [it] ha[s] to follow the normal process.” Id. at
41:39–41:44. CMS apparently trusts that manufacturers will
not “be lying” when they explain why they have asked to take
the exit option or will attempt to discern when manufacturers
do so. Id. at 41:52–41:57.

22
extant agreements, it must send a termination notice to CMS.
See 42 U.S.C. §§ 1395w-114a(b)(4)(B)(ii) and 1395w-
114c(b)(4)(B)(ii). The tax is suspended once the termination
notice has been received by the agency and has become
effective. See 26 U.S.C. § 5000D(c)(1)(A)(i)–(ii).

But if a manufacturer declines to participate in the

Program by taking CMS’s supposed expedited exit option, it
has to send a written request to CMS asking the agency to
terminate its agreements. CMS must then send the
manufacturer a termination notice that has legal effect under its
authority to terminate for “other good cause shown.” 42 U.S.C.
§§ 1395w-114a(b)(4)(B)(i) and 1395w-114c(b)(4)(B)(i). So
the Secretary would not have “received” any “notice of
termination” under the statute (because the termination notice
would emanate from the agency) and the excise tax would not
be suspended. 26 U.S.C. § 5000D(c)(1)(A)(i) (linking
suspension of the excise tax to notices of termination sent with
legal effect pursuant to 42 U.S.C. §§ 1395w-114a(b)(4)(B)(i)
and 1395w-114c(b)(4)(B)(i)); see also 42 U.S.C. § 1320f–
5(a)(6) (instructing CMS to share “the date on which [it]
receives” such notices with the Treasury so that tax liability
can be determined). Further, although CMS may promise not
to collect excise taxes accrued by a manufacturer that has taken
its supposed expedited exit option, it concedes that it has no
control over whether the IRS collects the tax. See Novartis
Pharms. Corp. v. Sec’y U.S. Dep’t of HHS, No. 24-2968, ECF
No. 25, Government Br. 34 (“If [a manufacturer] chooses to
sell the selected drug to Medicare beneficiaries at non-
negotiated prices, [it] will incur tax liability, and the IRS can
collect on that tax regardless of anything CMS does.”).

Third, CMS lacks the statutory authority to offer an

expedited exit option to a manufacturer after it has signed a

23
Program Agreement. For the same reasons it lacked the
statutory authority to offer the expedited exit option to avoid
the October 1, 2023, deadline, CMS lacked statutory authority
to offer the expedited exit option to avoid the August 1, 2024,
deadline. And CMS’s promise to grant an expedited exit to
manufacturers after they have signed Agreements conflicts
with a separate part of the Act: once a drug is selected, it must
remain in the Program until generic competition is approved
and marketed. See 42 U.S.C. §§ 1320f–1(c) and 1320f–2(b)
(providing that a selected drug “shall” remain in the Program
until CMS determined that a generic or biosimilar version of
the drug has been approved and is marketed). Once a
manufacturer has signed an Agreement, it is bound by it, full
stop. And after a manufacturer has done so, CMS “shall”
impose civil monetary penalties each time it violates an
Agreement. Id. § 1320f–6.

Fourth, the Government contends that, even under the

Companies’ reading of the statute, they could have avoided the
excise tax by sending termination notices to CMS by January
30, 2025.11 Not so. That contention conflates a manufacturer’s
ability to terminate its extant Medicare agreements with its
ability to terminate its Agreements under the Program. The Act
would have imposed excise taxes on the Companies beginning
on October 2, 2023, if they did not sign Program Agreements.
See 26 U.S.C. § 5000D(b)(1). Likewise, it would have imposed
11
The Manufacturer Discount Program changed the
termination deadline from January 29 to January 30 in 2024 for
Coverage Gap and Discount Program agreements set to take
effect in 2025. See 42 U.S.C. §§ 1395w-114a(b)(4)(B)(ii) and
1395w-114c(b)(4)(B)(ii). So my analysis discusses the January
29 deadline on a backward-looking basis and the January 30
deadline on a forward-looking basis.

24
the excise tax beginning on August 2, 2024, if they did not sign
Agreement Addendums. See id. § 5000D(b)(2).

If the Companies refused to sign on the dotted line, the

Act purported to offer them one way to avoid the excise tax:
by providing notice that they were terminating all their extant
Medicaid agreements and no longer had Medicare agreements
in effect. See id. § 5000D(c)(1)(A). But the Companies could
terminate their Medicare agreements only by providing 11 to
23 months’ notice, which prevented them from taking this
illusory option to avoid the excise tax before the October 2023
and August 2024 deadlines. See 42 U.S.C. §§ 1395w-
114a(b)(4)(B)(ii) and 1395w-114c(b)(4)(B)(ii).

Under the threat of the excise tax, the Companies signed

Agreements and Addendums. Once they did so, they had to
participate in the Program. And the Act neither offers them a
way to terminate their Agreements, nor grants CMS unfettered
discretion to terminate them to facilitate an early exit. See 42
U.S.C. §§ 1320f–1(c) and 1320f–2(b). So the Companies must
abide by the terms of their Agreements, or they will be subject
to civil penalties. See id. § 1320f–6.

To sum up: once the Companies signed the Agreements

by the October 1, 2023 deadline, their prior ability to terminate
their extant Medicare agreements upon 11 to 23 months’ notice
became irrelevant. They were bound by the Agreements to
participate in the Program even if they ceased all other business
with Medicare and Medicaid.

* * *

The majority errs fundamentally when it concludes that

the Companies voluntarily joined the Program. The Companies

25
could not have refused to participate in the Program without
incurring enterprise-crippling excise taxes, even if they had
stopped doing business with Medicare and Medicaid. To avoid
the excise taxes, they could have notified CMS that they
wished to terminate their extant Medicare and Medicaid
agreements. See 26 U.S.C. § 5000D(c). But the excise tax
would not have been suspended until the terminations of their
Medicare agreements became effective, which would have
taken 11 to 23 months. See id. § 5000D(c)(1)(A)(ii); 42 U.S.C.
§§ 1395w-114a(b)(4)(B)(ii), 1395w-114c(b)(4)(B)(ii). During
that period, the tax would have been imposed on the sales of
Eliquis and Xarelto. See 26 U.S.C. § 5000D(b), (c)(1)(A)(ii).
And if they signed a Program Agreement and then violated it,
the Act would have subjected them to civil monetary penalties.
42 U.S.C. § 1320f–6(a)–(c). CMS, like Don Corleone in The
Godfather, made the Companies “an offer [they] [couldn’t]
refuse.” (Paramount Pictures 1972).

Having concluded that the Companies were compelled

to participate in the Program, I now consider whether the
Program forces them to turn over physical doses of their drugs
to Medicare beneficiaries. It does.

The Government argues that the manufacturers have

one other “option” to avoid a taking. It contends that the
Program merely sets a price cap on drugs, providing only that
if a manufacturer sells a dose of a selected drug to a Medicare
beneficiary, then it must do so at the “maximum fair price” set
by CMS. In other words, the Government suggests that
manufacturers participating in the Program can refuse to sell
doses of their selected drugs to Medicare beneficiaries while
continuing to sell other drugs to Medicare and Medicaid

26
beneficiaries. Here again, the text and structure of the Program
and the Agreement show otherwise.

Compelling a property owner to turn over his personal

property effects a per se taking. Horne, 576 U.S. at 362. That
is true even though setting a price limit on sales does not. Id.
“[T]hat distinction flows naturally from the settled
difference . . . between appropriation and regulation” because
“[t]he Constitution [] is concerned with means as well as ends.”
Id.

The Act requires the Secretary of HHS to sign

Agreements with manufacturers that require them to provide
“access to the maximum fair price . . . with respect to . . . a
selected drug . . . to . . . maximum fair price eligible
individuals.” 42 U.S.C. § 1320f-2(a), (a)(3). Likewise, the
Agreement requires a manufacturer to “provide access to [the
maximum fair] price . . . to maximum fair price eligible
individuals.” Agreement at 2. So the statute and Agreement
require participating manufacturers to offer their drugs to
Medicare beneficiaries at the price set by CMS.

The Government reads the statute and Agreement

differently. It contends that the scheme allows a manufacturer
to refuse to sell a selected drug without withdrawing from
Medicare and Medicaid or paying civil penalties. On that view,
the scheme does not compel the manufacturers to provide
access to physical doses of its products.

But the Government’s interpretation clashes with the

Act’s exit option, which allows a manufacturer to decline to
participate in the Program only if it stops selling to Medicare
and Medicaid beneficiaries (and pays the excise tax during the
11-to-23-month termination period). See 26 U.S.C.

27
§ 5000D(c). On the Government’s reading of the Act, two exit
options exist: an explicit one that requires a manufacturer to
abandon roughly half the U.S. pharmaceutical market (i.e.,
ceasing all Medicare and Medicaid sales) and an implicit one
that allows a manufacturer to avoid most of those
consequences (i.e., refusing to sell a single selected drug to
Medicare purchasers). Its interpretation has two vices: it both
invents a second exit option that is not in the statute and negates
the statute’s explicit exit option. See Marx, 568 U.S. at 386
(“[T]he canon against surplusage is strongest when an
interpretation would render superfluous another part of the
same statutory scheme.”).

An adjacent provision the Act added to the Social

Security Act highlights the flaw in the Government’s proposed
interpretation. See 42 U.S.C. § 1395w-104(b)(3)(I)(i). Section
1395w-104(b)(3)(I)(i), which guarantees “[a]ccess to covered
Part D drugs,” provides that private plan sponsors “shall
include each covered part D drug that is a selected drug under
section 1320f-1 of this title for which a maximum fair price (as
defined in section 1320f(c)(3) of this title) is in effect with
respect to the year.” Id. In other words, sponsors must include
drugs selected for the Program in the prescription drug plans
they offer to Medicare beneficiaries. There is no option to
provide only some selected drugs.

The Government noted in a related case that this

provision binds only plan sponsors, not manufacturers. True
enough. But that does not cure the disharmony between the
Government’s interpretation of the Act’s mandate to provide
“access to the maximum fair price” and the “beneficiary
protection[]” guaranteed by this provision. 42 U.S.C.
§§ 1320f-2(a), (a)(3) and 1395w-104(b)(3)(I)(i). That
protection would be illusory if a manufacturer could refuse to

28
sell its selected drug to a Medicare beneficiary who is
guaranteed “access” under the Program. See Romero v.
SmithKline Beecham, 309 F.3d 113, 119 (3d Cir. 2002) (Alito,
J.) (explaining interpretations that would “frustrate the evident
purposes of [a] provision” are disfavored). So the Program
forces the manufacturers to turn over physical doses of their
drugs to Medicare beneficiaries.

* * *

For the reasons stated, the Program violates the

Companies’ right to refuse to sell doses of their drugs to
Medicare beneficiaries and dispensers. None of the illusory
alternative “options” proposed by the Government negates that
fact. Because the Program forces the Companies to turn over
their drugs to Medicare beneficiaries, it effects a per se taking.
See Horne, 576 U.S. at 361–62. So the Companies cannot be
compelled to participate in the Program unless they are
provided with just compensation in return. U.S. Const. amend.
V; Horne, 576 U.S. at 367.

I next consider the Companies’ argument that the Act

violates their First Amendment rights because it compels them
to engage in expressive speech.

Under threat of the excise tax, the Act orders the

Companies to participate in “negotiations.” See 42 U.S.C.
§§ 1320f–2(a) and 1320f–3(a). As part of that process, they
must sign an Agreement stating that they “agree” to
“negotiate” a “maximum fair price” for their selected drugs.
See id. § 1320f–2(a)(1). After the process is completed, they
must sign an Addendum stating “[t]he parties agree to a price

29
of [$ ],” which the statute calls the “maximum fair price.”
Agreement at 7. Thus, the Act compels the Companies to attest
that they agreed to negotiate a “maximum fair price” for their
drugs even though they were compelled to participate in the
Program for the reasons I have explained.

The First Amendment states: “Congress shall make no

law . . . abridging the freedom of speech.” U.S. Const. amend.
I. The Government cannot “compel a person to speak its own
preferred messages.” 303 Creative LLC v. Elenis, 600 U.S.
570, 586 (2023). Nor may it “compel affirmance of a belief
with which the speaker disagrees.” Hurley v. Irish-Am. Gay,
Lesbian & Bisexual Grp. of Bos., 515 U.S. 557, 573 (1995).
And the “freedom of speech ‘includes . . . the right to refrain
from speaking at all.’” Janus v. Am. Fed’n of State, Cnty. &
Mun. Emps. Council 31, 585 U.S. 878, 892 (2018) (citation
omitted).

Compelled speech violates the First Amendment “only

in the context of actual compulsion.” C.N. v. Ridgewood Bd. of
Educ., 430 F.3d 159, 189 (3d Cir. 2005). Yet compulsion “need
not take the form of a direct threat or a gun to the head.” Id.
(citation modified). According to one of our sister courts,
“[t]he consequence may be an indirect discouragement, rather
than a direct punishment, such as imprisonment, fines,
injunctions or taxes.” Axson-Flynn v. Johnson, 356 F.3d 1277,
1290 (10th Cir. 2004) (citation modified). In this case, the

30
Companies are compelled to speak by the threat of “a direct
punishment”: an enterprise-crippling tax.12 Id.

The Government (and the majority) contend that the

Program regulates conduct, not speech, reasoning that its
purpose is to “determine the price manufacturers may charge”
and “[t]he agreements are ordinary commercial contracts that
the government is using to set agreed-upon prices.”
Government Br. 46–47 (citation modified). On its view,
because the Program primarily regulates non-expressive,
commercial conduct, it affects speech only incidentally. I
disagree.

The Government inverts the distinction between

regulations of conduct and speech. Conduct regulations can
burden speech indirectly without offending the First
Amendment. For example, bans on “outdoor fires” incidentally

12
The majority holds that the Companies were not compelled
to speak. Majority Op. Section IV-B & n.30. I disagree because
the Companies could not have avoided the excise tax if they
declined to participate in the Program. See supra Section IV-
A-1. And the majority’s statement that “[t]he IRA’s excise tax
provisions . . . only apply after a manufacturer chooses to
participate in the Program,” Majority Op. Section IV-B n.30,
can be true only if one concludes that CMS’s expedited exit
option is lawful. But because it is unlawful, the excise tax
would have applied to any manufacturer that participated in the
Medicare Coverage Gap Discount Program before the Act was
signed into law, even if the manufacturer did not want to
participate in the Program from day one. See supra Section IV-
A-1.

31
forbid flag burning. Sorrell v. IMS Health Inc., 564 U.S. 552,
567 (2011) (citation modified). Likewise, a “typical price
regulation” regulates a “seller’s conduct” by prohibiting him
from charging certain prices, which affects speech “indirectly”
by forbidding him from advertising prices above the limit.
Expressions Hair Design v. Schneiderman, 581 U.S. 37, 47
(2017).

The Program does the opposite: it compels speech as a

means to regulate conduct. It orders the Companies to sign a
document stating that they “agree” to “negotiate” a “maximum
fair price” for their selected drugs. See 42 U.S.C. § 1320f–
2(a)(1). By doing so, it forces the Companies to convey the
government’s message about the Program—that it is a
voluntary “negotiation” that resulted in an agreement on a
“maximum fair price”—to incidentally set prices. To primarily
regulate conduct, the Program could have capped what the
Companies may charge or what CMS will pay for selected
drugs. That would, in turn, incidentally require the Companies
to sign agreements containing certain words and numbers—
prices—for drugs they sell to Medicare and Medicaid. But the
Act does much more than that.

To support its position, the Government analogizes to

Rumsfeld v. Forum for Academic & Institutional Rights, Inc.,
547 U.S. 47, 62 (2006) (FAIR). But its reliance on FAIR is
misplaced. There, the plaintiffs challenged a law that, as a
condition on federal funding, required universities to give
military recruiters and non-military recruiters equal access to
their campuses. 547 U.S. at 51–52. The Supreme Court held
that the law did not violate the First Amendment because its
equal access mandate regulated conduct, not speech. Id. at 60.
Any speech was “plainly incidental.” Id. at 62. For example, if
a school offered to send emails or post notices on an

32
employer’s behalf, it was also required to do so on behalf of
the military. Id. at 61–62.

The Court recognized that such “compelled statements

of fact (‘The U.S. Army recruiter will meet interested students
in Room 123 at 11 a.m.’), like compelled statements of
opinion, are subject to First Amendment scrutiny.” Id. at 62.
Nonetheless, the mandate did not violate the First Amendment
because the compelled speech was “not inherently expressive.”
Id. at 64. The Court reasoned that “[n]othing about recruiting
suggests that law schools agree with any speech by recruiters.”
Id. at 65.

Here, by contrast, the Act’s burdens on speech are not

incidental to regulated conduct. The Act orders the Companies
to speak meaningfully and substantively—by forcing them to
sign the Agreements and Addenda in which they must “agree”
to “negotiate” a “maximum fair price.” See 42 U.S.C.
§§ 1320f–2(a)(1); Agreement at 2, 7. Had the law challenged
in FAIR required universities to send emails expressing certain
opinions or representations on behalf of military recruiters, that
case likely would have come out differently. So too here. The
Act could have avoided First Amendment scrutiny simply by
setting prices the United States would pay for the selected
drugs or directing CMS to do likewise. See Expressions Hair
Design, 581 U.S. at 47. Instead, the Act directly compels
speech—rather than regulate conduct—so it is subject to First
Amendment scrutiny. FAIR, 547 U.S. at 62.

Put simply, because the Act directly compels the

Companies to make “statements of fact,” it is “subject to First
Amendment scrutiny.” FAIR, 547 U.S. at 62. So I must
determine whether that compelled speech is expressive. See id.
at 61–68. That determination would be required even if the

33
majority were correct in asserting that the Program primarily
regulates conduct. See id.

I conclude that the speech compelled by the Act is

expressive. That is true whether the Program’s mandate that
the Companies sign Agreements and Addendums is framed as
compelling pure speech (i.e., utter these words) or expressive
conduct (i.e., sign this document). The Supreme Court has
recognized that signing a document—including government
funding agreements—can constitute expression, although it
has not clarified whether doing so is pure speech or inherently
expressive conduct. See, e.g., John Doe No. 1 v. Reed, 561 U.S.
186, 194–95 (2010); Agency for Int’l Dev. v. All. for Open
Soc’y Int’l, 570 U.S. 205, 210, 218 (2013) (AID).

In any case, the First Amendment protects

“conduct . . . inten[ded] to convey a particularized message”
where “the likelihood was great that the message would be
understood by those who viewed it.” Texas v. Johnson, 491
U.S. 397, 404 (1989) (citation modified). Here, the Act forced
the Companies to sign an Agreement saying they “agree” to
“negotiate” a “maximum fair price” for Eliquis and Xarelto.
See 42 U.S.C. §§ 1320f–2(a)(1). It also forced them to sign an
Addendum stating they “agree to a price of [$ ].” Agreement
at 7. Both statements are expressive. By attesting that they
“agree” to “negotiate,” the Companies represented that their
participation in the negotiation was voluntary. And by stating
that they have “agree[d]” that the price is a “maximum fair

34
price,” they are confessing to having previously charged unfair
prices.

The Agreements at issue are similar to the funding

award agreement at issue in AID, although they are further
from the heartland of the First Amendment than the
referendum petition at issue in Reed. In any event, “[t]he
expressive, overtly political nature of” forcing the Companies
to sign the Agreements is “both intentional and
overwhelmingly apparent.”13 Johnson, 491 U.S. at 406. For
example, the President said in a State of the Union address that
“Medicare is negotiating lower prices for some of the costliest
drugs.” The White House, Remarks by President Biden in State
of the Union Address (Mar. 8, 2024), https://perma.cc/J67S-
MVU4. The President also released a video “announc[ing] that
the manufacturers of ten drugs are coming to the negotiating
table to lower prices. They’re taking steps to participate in the
negotiating program so we can give seniors the best possible
13
Although the statute defines “maximum fair price” and uses
the terms “agree” and “negotiate,” that does not render these
terms non-expressive. After all, “if the law were otherwise,
there would be no end to the government’s ability to skew
public debate by forcing companies to use the government’s
preferred language.” Nat’l Ass’n Mfrs. v. SEC, 800 F.3d 518,
530 (D.C. Cir. 2015) (citation modified). The majority relies
on Meese v. Keene, 481 U.S. 465, 467 (1987), to hold
otherwise, but it is telling that even the Government was
unwilling to do so in its brief. In Keene, the challenged
statutory term—“political propaganda”—did not appear on the
form that the regulated parties had to sign. Id. at 471. But here,
the Act forces the Companies to use certain terms by
compelling them to sign Agreements “agreeing” to “negotiate”
a “maximum fair price.” See 42 U.S.C. § 1320f–2(a)(1).

35
deal.” The White House, Biden-Harris Administration Takes
Major Step Forward in Lowering Health Care Costs;
Announces Manufacturers Participating in Drug Price
Negotiation Program (Oct. 3, 2023), https://perma.cc/N23L-
CWVK. The White House similarly “announced that all
manufacturers of all ten drugs selected for negotiation have
signed agreements to participate.” Id. And despite the excise
tax precluding exit, CMS claimed that “entering into an
Agreement is voluntary.” CMS, Medicare Drug Price
Negotiation Program: Initial Memorandum, Implementation
of Sections 1191 – 1198 of the Social Security Act for Initial
Price Applicability Year 2026, and Solicitation of Comments,
at 27 (Mar. 15, 2023), https://perma.cc/SRN2-FQHF; see also
2023 Revised Guidance at 120.

It bears repeating that the Act could have avoided First

Amendment scrutiny simply by setting prices the United States
would pay for the selected drugs or directing CMS to do
likewise. See Expressions Hair Design, 581 U.S. at 47. Instead,
in Orwellian fashion, the Act forced the Companies to sign
Agreements that include representations they have abjured
from the start. See 42 U.S.C. § 1320f–2(a)(1). Their consistent
view has been that they “agree” only under protest and there is
no true “negotiation” because they must participate in the
Program.

As for “maximum fair price,” the Companies reject both

the concept and substance of that phrase. And with very good
reason. A fair price, both in common parlance and as defined
by the United States Treasury, is what a knowledgeable buyer
would pay a knowledgeable seller, with neither compelled to
act. See, e.g., 26 C.F.R. § 1.170A-1(c)(2); see also 4 Nichols
on Eminent Domain § 12.02 (Matthew Bender, 3rd ed. 2025)
(same). Measured against those standards, the phrase

36
“maximum fair price” is oxymoronic at best. And even if the
phrase were intelligible, the Companies have rejected it
because it suggests that the prices they had charged—which
were substantially higher than the prices set by the Program—
were strikingly “unfair.”

In sum, the Act forced the Companies to convey the

Government’s message about a subject of great political
significance and debate: whether the Program is a voluntary
negotiation or a forced sale at prices set by CMS.14 See Reed,

14
At oral argument in related cases, the Government argued
for the first time that the Program is consistent with the First
Amendment because CMS will not release signed Agreements
to the public. See Novo Nordisk Inc. v. Sec’y U.S. Dep’t of
HHS, No. 24-2510, Oral Arg. at 39:30–41:48; Novartis
Pharms. Corp. v. Sec’y U.S. Dep’t of HHS, No. 24-2968, Oral
Arg. at 30:00–30, 33:00–45. But compelled speech is not
rendered constitutional because it is made only to the
government. See Americans for Prosperity Found. v. Bonta,
594 U.S. 595, 616 (2021); see also NetChoice, LLC v. Bonta,
113 F.4th 1101, 1117–18 (9th Cir. 2024). And nothing prevents
CMS from making the Agreements public if it changes its
mind. Moreover, even if the Agreements remain private, the
public can easily connect the dots: CMS has released the
template Agreement and Addendum, the names of
manufacturers that have signed Agreements, the drugs
selected, and the prices it has set. So a manufacturer could
disclaim its value-laden actions and statements “only at the
price of evident hypocrisy.” AID, 570 U.S. at 219.

37
561 U.S. at 195 (“[T]he expression of a political view
implicates a First Amendment right.”).

CMS has added a disclaimer to the Agreement, which

states that its terms are statutory terms of art and do not hold
their colloquial meaning. The disclaimer says:

In signing this Agreement, the Manufacturer

does not make any statement regarding or
endorsement of CMS’ views, and makes no
representation or promise beyond its intention to
comply with its obligations under the terms of
this Agreement with respect to the Selected
Drug. Use of the term “maximum fair price” and
other statutory terms throughout this Agreement
reflects the parties’ intention that such terms be
given the meaning specified in the statute and
does not reflect any party’s views regarding the
colloquial meaning of those terms.

Agreement at 4. That effort falls short because “general

disclaimer[s] . . . [do] not erase [] First Amendment
infringement[s].” Circle Schools v. Pappert, 381 F.3d 172, 182
(3d Cir. 2004); see also Pac. Gas & Elec. Co. v. Pub. Utilities
Comm’n of California, 475 U.S. 1, 15 n.11 (1986) (plurality
opinion); Hurley, 515 U.S. at 576. The Government cannot
“require speakers to affirm in one breath that which they deny
in the next.” Hurley, 515 U.S. at 576 (citation omitted). For the
same reason, the Companies’ ability to criticize the Program
does not erase the First Amendment infringement. See id.; AID,
570 U.S. at 219. While CMS couched the disclaimer’s
language in lawyerly terms, it is also telling that the

38
Government recognized the public could “view[] . . . the
colloquial meaning of those terms,” Agreement at 4, as
conveying a politically charged message.

Because the Program compels expressive, content-

based speech, it triggers strict scrutiny. Turner Broad. Sys., Inc.
v. FCC, 512 U.S. 622, 653–55 (1994). To survive, “it must be
narrowly tailored to promote a compelling Government
interest.” United States v. Playboy Ent. Grp., Inc., 529 U.S.
803, 813 (2000). And the Government must “choose[] the least
restrictive means to further the articulated interest.” Sable
Commc’ns of California, Inc. v. FCC, 492 U.S. 115, 126
(1989).

The speech mandate fails strict scrutiny. The

Government does not have a compelling interest in requiring
the Companies to sign Agreements misrepresenting that they
“agree[d]” to “negotiate” a “maximum fair price” for their
drugs when they could not decline to do so without incurring
enterprise-crippling tax liabilities. And while the Government
surely has a legitimate interest in reducing Medicare
expenditures, the Program is not narrowly tailored to further
that interest. The Government often sets limits on what it will
pay for drugs, including through voluntary negotiations,
without requiring counterparties to sign Agreements attesting
that they “agree” to “negotiate” the “maximum fair” terms.
See, e.g., 38 U.S.C. § 8126(a)–(h) (setting price limits on what
the Departments of Defense and Veterans Affairs will pay for
prescription drugs and enabling them to negotiate lower

39
prices). So the Program quite gratuitously compels speech in
violation of the First Amendment.

Because I would find several provisions of the Act

unconstitutional, I must consider whether they are severable. I
apply a “well established” two-part test. Alaska Airlines, Inc.
v. Brock, 480 U.S. 678, 684 (1987). First, I must determine
whether the rest of the statute will operate as Congress
intended. Id. at 685. If not, I must conclude that the rest of the
statute is invalid. Id. Second, even if the remaining provisions
can operate as Congress intended, I must determine whether
Congress would have enacted them standing alone. Id.

The provisions I would hold unconstitutional as applied

to the Companies—26 U.S.C. § 5000D and 42 U.S.C.
§§ 1320f–1, 1320f–2, 1320f–3, and 1320f–6—are not
severable from the rest of the Program. First, the rest of the
statute would not operate as Congress intended if the
unconstitutional provisions were severed. See id. As for the
Companies’ Fifth Amendment claims, the excise tax provision
works together with the provisions governing the very heart of
the Program—selections, negotiations, Agreements, and
monetary penalties—to effect a taking. See 26 U.S.C. § 5000D;
42 U.S.C. §§ 1320f–1 (selections), 1320f–2 (Agreements),
1320f–3 (negotiations), and 1320f–6 (civil penalties). The
Program would not work as Congress intended if
manufacturers could decline to participate without incurring
excise tax or civil penalty liability, particularly because that
would allow manufacturers to continue to sell their selected
drugs to Medicare beneficiaries at any price they chose without
immediate consequences. 26 U.S.C. § 5000D(a)–(c); 42
U.S.C. § 1320f–6(a)–(c). Nor would the Program function as

40
Congress intended without the clear rules Congress set about
how long selected drugs must remain in the Program, 42
U.S.C. §§ 1320f–1(c) and 1320f–2(b), Congress’s command
that Agreements guarantee Medicare beneficiaries access to
the “maximum fair price,” id. § 1320f–2(a)(1), (3), and
participating manufacturers’ obligation to complete
“negotiations,” id. § 1320f–3(a).

As for the Companies’ First Amendment claims, the

excise tax provision works combined with another provision at
the heart of the Program: the requirement for the Program to
be implemented through Agreements signed by the
manufacturer after “negotiat[ions].” See 26 U.S.C. § 5000D;
42 U.S.C. § 1320f–2(a). The Program cannot function at all
without such Agreements, much less operate as Congress
intended.

The next question is whether the unconstitutional

provisions of the Program are severable from the remaining
portions of the Inflation Reduction Act. They are. The Act
addressed a broad array of topics, including corporate taxes,
stock repurchases, IRS funding, prescription drug inflation
rebates, other amendments to Medicare Part D, energy
production, carbon emissions, and more. See Inflation
Reduction Act of 2022, Pub. L. No. 117–169, 136 Stat. 1818
(2022). The only significant relationship between the Program
and the rest of the Act is that the Program’s excise tax links
liability to the withdrawal provisions of a separate program
created by the Act: the Medicare Manufacturer Discount
Program. See Inflation Reduction Act of 2022 § 11201(c)(1)
(codified at 42 U.S.C. § 1395w–114c(b)(4)(B)(i)–(ii)).

First, the rest of the statute would operate as Congress

intended standing alone. See Alaska Airlines, 480 U.S. at 685.

41
The Medicare Manufacturer Discount Program replaced the
Coverage Gap Discount Program and governs how CMS
normally enters agreements with manufacturers to cover
prescription drugs. While the Drug Price Negotiation Program
links liability to certain actions governed by the Manufacturer
Discount Program, nothing in the operation of the
Manufacturer Discount Program turns on a provision of the
Drug Price Negotiation Program. So the rest of the Act remains
“fully operative as a law.” Id. at 684 (citation omitted).

Second, there is no evidence that Congress would not

have enacted the remaining provisions standing alone. See id.
at 685. And no party suggests otherwise. The rest of the Act
does not turn upon the legal mechanisms of the Program, and
there is no sign that the policy goals of the remaining
provisions will be so disrupted without the Program that
Congress would not have enacted them standing alone. So my
conclusion that the challenged statute cannot lawfully be
enforced is limited to the Program. See Inflation Reduction Act
of 2022 §§ 11001–03 (codified at 26 U.S.C. § 5000D and 42
U.S.C. §§ 1320f, 1320f–1, 1320f–2, 1320f–3, 1320f–4, 1320f–
5, 1320f–6, and 1320f–7).

VI

Finally, I turn to the proper remedy. I would hold that

the Program takes property from the Companies and compels
them to speak. Still, the Government may take property so long
as it provides just compensation in exchange. See U.S. Const.
amend. V; see also Horne, 576 U.S. at 367. But I need not
reach whether the Program could provide the Companies with

42
just compensation in certain circumstances because the
Government cannot compel them to speak.

By its plain terms, the Act requires the Companies to

sign Agreements in which they must attest that they “agree” to
“negotiate” a “maximum fair price” for their drugs. See 42
U.S.C. § 1320f–2(a)(1). Because I would hold that this
mandate compels speech in violation of the First Amendment,
the constitutional infringement could not be remedied by
removing certain terms from the Agreements. The Companies
were forced to sign these Agreements under the threat of
unavoidable, enterprise-crippling tax liability. So I would hold
that they cannot be compelled to sign Agreements to
participate in the Program and that such Agreements obtained
in violation of the Constitution cannot be enforced against
them.

* * *

This appeal is of great importance to consumers of

pharmaceutical drugs, the companies that provide them, and
the public at large. The United States spends an estimated $200
billion per year on prescription drugs. See KFF, supra. As the
dominant purchaser of those drugs, the federal government is
in a strong position to negotiate, in arms-length transactions,
favorable prices to benefit consumers and the public fisc alike.
Or, as counsel for both sides and the Government agreed,
Congress could simply pass a law setting drug prices.15

Instead of doing that, Congress compelled

manufacturers to subject themselves to prices set by CMS. The
byzantine scheme established by the Act forced BMS and

15
Oral Arg. at 3:00–4:05, 25:15–26:45.

43
Janssen to turn over Eliquis and Xarelto at prices set by CMS
while requiring the Companies to misrepresent that they agreed
to such prices. That scheme violates the Companies’ First and
Fifth Amendment rights. With respect, I dissent.

44