Boehringer Ingelheim Pharmaceuticals, Inc. v. Department of Health & Human Services (2d Cir. 2025)
Clarifying Voluntary Participation, Unconstitutional Conditions, and APA Exemption under the Inflation Reduction Act

I. Introduction

In Boehringer Ingelheim Pharmaceuticals, Inc. v. Department of Health & Human Services, the United States Court of Appeals for the Second Circuit addressed an array of constitutional and administrative attacks on the Inflation Reduction Act’s (“IRA”) Medicare Drug Price Negotiation Program. Boehringer—manufacturer of the blockbuster diabetes drug Jardiance—argued the program violated the Takings, Due Process, and Free Speech Clauses, imposed unconstitutional conditions, and was adopted in violation of the Administrative Procedure Act (“APA”). The court unanimously rejected those claims and affirmed the district court’s judgment in favor of HHS and CMS.

The ruling is significant because it extends and solidifies the Second Circuit’s “voluntary participation” precedent, Garelick v. Sullivan, to the pharmaceutical-pricing context, clarifies the boundaries of the unconstitutional-conditions doctrine in federal spending programs, and confirms that Congress expressly suspended APA notice-and-comment requirements for the first three years of IRA-based drug pricing guidance.

II. Summary of the Judgment

• Voluntary Participation. Citing Garelick, the court held that drug manufacturers are not legally compelled to participate in Medicare or the Negotiation Program; perceived economic pressure does not transform a voluntary program into a compulsory one.
• Takings & Due Process. Because participation is voluntary, the program does not physically appropriate property or deprive manufacturers of property without due process.
• First Amendment. Any “speech” contained in the manufacturer agreement (e.g., use of the term “maximum fair price”) is not compelled because manufacturers remain free to withdraw; hence no unconstitutional compelled speech.
• Unconstitutional Conditions. Conditions placed on Medicare and Medicaid participation regulate only the federal programs themselves and do not reach private-market conduct; therefore, they are constitutionally permissible.
• APA Claim. IRA § 11001(c) expressly authorizes CMS to proceed by “program instruction or other forms of program guidance” for 2026-2028, displacing the APA’s notice-and-comment mandate.

III. Analysis

A. Precedents Cited & Their Influence

1. Garelick v. Sullivan, 987 F.2d 913 (2d Cir. 1993)
   
   Established that physicians who voluntarily participate in Medicare cannot claim a taking when the program imposes price controls. The Second Circuit treats Garelick as dispositive: the absence of legal compulsion forecloses takings and due-process theories.
2. National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012)
   
   Boehringer relied on NFIB’s “economic dragooning” language, but the court distinguished NFIB as a Spending-Clause/federalism decision directed at state coercion, not private-sector price negotiations.
3. Horne v. Department of Agriculture, 576 U.S. 350 (2015)
   
   Boehringer invoked Horne (physical appropriation of raisins). The panel held Horne inapposite: government here is a market participant purchasing drugs, not seizing title to physical property.
4. Regan v. Taxation With Representation, 461 U.S. 540 (1983) & Rust v. Sullivan, 500 U.S. 173 (1991)
   
   Used to frame the unconstitutional-conditions analysis: Congress may attach conditions that define the scope of a federal funding program, so long as it does not leverage funds to regulate conduct outside the program.
5. FCC v. League of Women Voters, 468 U.S. 364 (1984) & Agency for Int’l Dev. v. Alliance for Open Society Int’l, 570 U.S. 205 (2013)
   
   Provide contrast: where Congress attempted to restrict recipients’ use of private funds or their speech outside the subsidized program, the Court invalidated the conditions—constraints not present in the IRA scheme.

B. Legal Reasoning

1. Step 1 – Voluntariness as a Threshold. The court began with voluntariness: if participation is voluntary, then price limits are part of a bargained-for exchange, not a confiscation. Economic hardship is not a legal compulsion.
2. Step 2 – Application to Each Constitutional Claim.
   • Takings. No per-se physical taking because manufacturers can avoid the program by exiting Medicare/Medicaid.
   • Due Process. Without a “deprivation,” procedural protections are unnecessary.
   • First Amendment. Any speech is contractual and avoidable; the agreement even disclaims endorsement.
3. Step 3 – Unconstitutional Conditions. Condition concerns only prices charged inside Medicare; it does not burden sales in the private market, thus falls within Congress’s spending power.
4. Step 4 – APA Statutory Displacement. IRA § 11001(c) expressly substitutes “program guidance” for rulemaking for 2026-2028, satisfying the heightened “clearly different” standard for APA displacement.

C. Impact of the Judgment

• Solidifies “Voluntary Participation” Doctrine. Garelick now extends from physician services to pharmaceutical pricing— likely influencing other Circuits confronting IRA suits.
• Roadmap for IRA Challenges. Other pending cases (e.g., in the Fifth, Seventh, and D.C. Circuits) will grapple with the Second Circuit’s analysis; divergences could produce a circuit split.
• Guidance for Agency Rulemaking. Confirms Congress can expressly override APA procedures on a temporary basis and direct agencies to act via guidance.
• Negotiation Leverage. Drug makers must now calculate litigation prospects against the backdrop of an appellate precedent recognizing the excise-tax “stick” as a lawful consequence of voluntary non-participation.
• Federal Spending Programs Generally. The opinion reinforces the distinction between regulations governing use of federal funds and attempts to regulate private-market conduct— a line relevant to education, infrastructure, and climate-related funding conditions.

IV. Complex Concepts Simplified

Takings Clause (Physical vs. Regulatory)

A physical taking occurs when government seizes or authorizes occupation of property. A regulatory taking arises when regulations go so far they “effectively” appropriate property. Voluntary deals are usually not takings.

Unconstitutional Conditions Doctrine

Government cannot require surrender of a constitutional right as the price of a benefit. But it can define how federal money is spent, so long as the condition stays inside the program.

APA Notice-and-Comment Rulemaking

Agencies must normally publish proposed rules, take public comment, and issue a final rule. Congress can expressly suspend these steps, as it did for the IRA’s first three negotiation cycles.

IRA Excise Tax

A tax (up to 1900%) on sales of a “selected drug” during periods when the manufacturer refuses to negotiate or fails to agree to a price—functioning as Congress’s negotiation “lever.”

CMS Guidance vs. Regulations

“Guidance” lacks the force of law unless Congress says otherwise; here Congress directed CMS to proceed via guidance for limited years, effectively giving those documents the governing effect for the program.

V. Conclusion

The Second Circuit’s decision in Boehringer v. HHS crystallizes three doctrinal points:

1. Participation in Medicare’s new drug-price negotiations is legally voluntary; economic stakes do not transform a powerful incentive into compulsion.
2. Because the program regulates only the terms on which the federal government buys drugs, it withstands Takings, Due Process, First Amendment, and unconstitutional-condition challenges.
3. Congress explicitly displaced APA notice-and-comment for early IRA implementation, permitting CMS to operate through guidance and template agreements until 2029.

The opinion provides a durable precedent for future pharmaceutical litigation and illustrates how Congress can structure aggressive cost-containment programs while navigating constitutional shoals. Unless other circuits chart a different course, manufacturers challenging the IRA will face a formidable legal barrier in the Second Circuit’s reasoning.