Merck sues over new Medicare drug pricing powers

Merck filed a lawsuit against the Biden administration on Tuesday over Medicare’s ability to negotiate drug prices under the Inflation Reduction Act, calling the provision a “sham,” asking that it be declared unconstitutional and that any agreements reached by the program be blocked.

When the Inflation Reduction Act passed last year, it included the Medicare Drug Price Negotiation Program, giving Medicare for the first time the ability to directly negotiate drug prices with manufacturers.

This provision is expected to lower drug costs. Negotiations are set to occur throughout 2023 and 2024, and the effects of these agreements expected to be seen beginning in 2026.

“In reality, however, this ‘Drug Price Negotiation Program’ is a sham,” Merck stated in its complaint, pointing to penalties that drug companies face if they do not engage.

“It involves neither genuine ‘negotiations’ nor real ‘agreements.’ Rather, once HHS unilaterally selects a drug for inclusion in the program, its manufacturer is compelled to sign an ‘agreement’ promising to sell the drug to Medicare beneficiaries at whatever ‘fair’ price the agency dictates, which must represent at least a 25% to 60% discount,” the company added.

The complaint likened the negotiations to “extortion” and argued the program violated the Fifth Amendment, which states private property may not be taken for public use “without just compensation,” because Medicare is seeking to obtain products for less than “fair market value.”

The drug company also argues that creating the impression that it is a voluntary participant of the program is a violation of its First Amendment rights.

“We’ll vigorously defend the President’s drug price negotiation law, which is already lowering health care costs for seniors and people with disabilities,” Health and Human Services Secretary Xavier Becerra wrote on Twitter in response to the suit.

White House Press Secretary Karine Jean-Pierre said in a press briefing Tuesday, “We are confident we will succeed. There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.”

“Any time profits of the pharmaceutical industry are challenged, they make claims about it hindering their ability to innovate. Not only are these arguments untrue, but the American people do not buy them,” Jean-Pierre added. “So President Biden is going to remain focused on lowering America’s health care costs, ensuring the benefits of the law reach the American people.”

Merck said it expects its diabetes drugs Januvia and Janumet to be subject to the Medicare drug negotiation program, as well as its cancer treatment Keytruda. The Centers for Medicare and Medicaid Services is scheduled to publish the first 10 Medicare Part D drugs chosen for negotiation in September.

Supporters of drug price negotiations have frequently argued that the U.S. pays far more for prescription drugs than other developed countries where governments negotiate or regulate drug prices. Pharmaceutical industry stakeholders have, in turn, argued negotiation will hamper medical innovation.

Progressive consumer rights group Public Citizen condemned the lawsuit. The organization’s president, Robert Weissman, blasted it as a “desperate attempt by the industry to beat back popular legislation that would curtail Big Pharma’s ability to price gouge Medicare and secure monopoly profits.”

Merck requested in its complaint that the Medicare Drug Price Negotiation Program be found in violation of the First and Fifth Amendment. The company also asked that the federal government be blocked from “forcing” it to sign a manufacturer agreement and declare any agreements reached through the program to be null and void.