Merck accuses US of extortion in drug price control lawsuit

Merck is suing the United States over a law giving the federal government the power to negotiate prices for some of the most expensive drugs, arguing parts of the legislation are unconstitutional and amount to extortion.

The US drugmaker on Tuesday said reforms in the Inflation Reduction Act, a central part of President Joe Biden’s agenda to reduce the cost of prescription medicines, violated the first and fifth amendments to the constitution.

This is not negotiation. It is equivalent to extortion. And it violates the constitution in at least two obvious respects, Merck said in a court filing.

The reforms were fiercely opposed by the pharmaceutical industry, which warned they would cripple innovation and hamper the development of life-saving drugs.

The Merck lawsuit is the first filed by a major pharmaceutical company, but analysts predict others are likely to follow suit and sue the government before full implementation of the drug price-negotiating elements of the act by the end of the year. year.

Under the proposed reforms, Medicare, the US taxpayer-funded retirement health program, would be allowed to negotiate prices for a limited number of brand-name drugs. The process is expected to begin in earnest in September, when the Centers for Medicare & Medicaid Services (CMS) will identify 10 expensive drugs that will be the focus of the negotiation.

More drugs are expected to be added to this list over the next few years in a move that the Congressional Budget Office estimates will yield billions of dollars in savings over a decade.

Merck said in its lawsuit that the so-called drug price negotiation program was a sham because it involved neither real negotiation nor real deals. The unique purpose of this scheme was for Medicare to get prescription drugs without paying fair market value, he said.

Once the government unilaterally selects a drug for inclusion in the program, its manufacturer is required to sign an agreement promising to sell the drug to Medicare beneficiaries at any fair price dictated by the agency, which must represent at least a 25-60 % discount, Merck said.

If a manufacturer refused to participate in this negotiation or refused to agree to sell at the stipulated price, he would incur a ruinous daily excise tax equal to multiples of the drugs’ daily revenue, the drugmaker added.

Xavier Becerra, US health secretary, said on Tuesday: We strongly defend the presidential drug price negotiation law, which is already lowering health care costs for older adults and people with disabilities. The law is on our side.

Raymond James & Associates analyst Chris Meekins said Merck was the first, but probably not the last, major drugmaker to challenge the government.

Of course, when you talk about a policy that will likely remove $150 billion from the pharmaceutical sector in a decade based on estimates from the Congressional Budget Office, he’s been pretty clear. [the] the industry would sue to try to stop it.

Christopher Viehbacher, chief executive of Biogens, told an audience at a biotech conference in Boston that the company would consider filing its own lawsuit against the IRA.

He said Merck’s claim that the reforms were extortion was accurate.

Roche told the Financial Times it is reviewing its legal and policy options regarding the negative impacts of the IRA on patients and innovation.

Legal experts said the challenge to the IRA could find a sympathetic hearing from US courts, particularly as Merck has indicated it is ready to fight its case all the way to the Supreme Court.

Matt Wetzel, a partner in the life sciences division of Goodwin, a law firm, said Merck’s lawsuit highlighted the coercive elements of the drug pricing reforms, which included significant restrictions on the ability of drugmakers to appeal the decisions CMS and the lack of real negotiation. This might be viewed sympathetically by US courts, he said.

One question, however, is whether a court will find that a business has still been harmed or injured as a result of IRA provisions or whether that harm or injury will not actually occur until September 1 of this year, when the top 10 drugs will be selected for the program, Wetzel said.

Additional reporting by Hannah Kuchler

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