Merck sues US government to halt Medicare drug price negotiation

By Michael Erman

NEW YORK (Reuters) -Merck & Co sued the U.S. government on Tuesday, seeking an injunction of the drug price negotiation program contained in the Inflation Reduction Act (IRA), which it argues violates the Fifth and First Amendments to the U.S. Constitution.

This is the first attempt by a drugmaker to challenge the law, which the pharmaceutical industry says will result in a loss of profits that will force them to pull back on developing groundbreaking new treatments. The Biden administration’s drug pricing reform aims to save $25 billion annually by 2031 through price negotiations for Medicare.

The lawsuit, filed in the U.S. District Court for the District of Columbia, argues that under the law, drugmakers would be forced to negotiate prices for drugs in the government’s Medicare health insurance program at below market rates.

Merck asserts this violates the part of the Fifth Amendment that requires the government to pay just compensation for private property taken for public use.

After the government released its roadmap for price negotiations in March, industry lobbyists and lawyers told Reuters that drugmakers were likely to file lawsuits arguing that the government is not complying with the U.S. Constitution.

“The IRA uses severe penalties to requisition medicines while refusing to pay their fair value—and then coerces manufacturers to smile, play along, and pretend it is all part of a ‘fair’ and voluntary exchange,” Merck said. “This is political Kabuki theater.”

The drugmaker also argues that the law will force companies to sign agreements conceding that the prices are fair, which it claims is a violation of the First Amendment’s protections of free speech.

Merck filed its suit against the U.S. Department of Health & Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS), as well as HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure. HHS and CMS were not immediately available to comment.

Merck said it plans to litigate the matter all the way to the Supreme Court if necessary.

The first ever Medicare drug price reduction process is due to begin in September when CMS identifies its 10 most costly drugs. Following negotiations on that first wave of drugs, new prices will go into effect in 2026, which could cut industry sales by $4.8 billion in that first year.