Merck sues the US government to stop negotiating the price of Medicare drugs

NEW YORK, June 6 (Reuters) – Merck & Co (MRK.N) sued the U.S. government on Tuesday, seeking to halt the Medicare drug price negotiation program contained in the Inflation Reduction Act (IRA), which he says violates the Fifth and First Amendments to the United States Constitution.

This is the first attempt by a drugmaker to defy the law, which the pharmaceutical industry says will result in lost profits forcing them to pull out of developing innovative new treatments.

Americans pay more for prescription medicines than any other country. The Biden administration’s drug pricing reform aims to save $25 billion annually by 2031 through price negotiations for drugs paid for by Medicare, the government’s health plan for those 65 and older.

The lawsuit, filed in the US District Court for the District of Columbia, argues that under the law, drugmakers would be forced to negotiate drug prices at below-market rates.

Merck says 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 claiming the government is not abiding by the US constitution. .

Merck called the talks with the Centers for Medicare and Medicaid Services (CMS) coercive and said it forces drugmakers into “political Kabuki theater” by pretending the negotiations are voluntary.

“This is not ‘negotiation.’ It amounts to extortion,” Merck said in the lawsuit.

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

Signage is seen at the Merck & Co. headquarters in Kenilworth, New Jersey, U.S., November 13, 2021. REUTERS/Andrew Kelly//File Photo

Merck filed lawsuits against the US Department of Health and Human Services (HHS) and CMS, as well as HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure.

“Big Pharma routinely forces Americans to pay many times what customers in other countries do for the same drugs,” White House spokeswoman Karine Jean-Pierre said Tuesday. “We are confident that we will succeed in the courts. There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.”


Ameet Sarpatwari, an attorney and professor at Harvard Medical School, said in an email that Merck’s lawsuit is based on weak claims.

“The government is not forcing Merck. It is exercising its rights and responsibility to negotiate on behalf of older adults and taxpayers the prices of a small number of drugs that have already been on the market for several years,” he said.

Robin Feldman, a law professor at UC College of the Law in San Francisco, agreed Merck will have a tough job convincing the courts, but said the issues in this area of ​​the law are undecided and the case is likely headed. to the Supreme Court.

Wells Fargo analyst Mohit Bansal said in a research note that the lawsuit could be the first of many brought by drugmakers, who may also be challenging the law on more procedural grounds.

Merck said it plans to take the matter up to the US Supreme Court if necessary.

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

Merck’s best-selling drug, the cancer immunotherapy Keytruda, could be in talks as early as 2028. Last year, Keytruda sales exceeded $20 billion – more than a third of Merck’s total sales – and it is expected to reach $30 billion in 2026, according to analyst estimates.

Reporting by Michael Erman; Additional reporting by Patrick Wingrove in New York and Nandita Bose in Washington; Editing by Edwina Gibbs, Nick Zieminski and Bill Berkrot

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