NEW YORK, June 6 — Merck & Co sued the US government today, seeking to halt the Medicare drug price negotiation program contained in the Inflation Reduction Act (IRA), which it argues is violates the Fifth and First Amendments to the US 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.
Americans pay more for medicines than any other country. The Biden administration’s drug pricing reform aims to save US$25 billion (RM115 billion) annually by 2031 through price negotiations for Medicare.
The lawsuit, filed in the US 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 US Constitution.
Merck called the talks with CMS coercive and forces drugmakers to participate in “political Kabuki theatre” by pretending negotiations are voluntary.
“This is not ‘negotiation.’ It is tantamount to extortion,” Merck said in the suit.
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.
Wells Fargo analyst Mohit Bansal said in a research note that the lawsuit could be the first of many filed by drugmakers, who could also challenge the law for more procedural reasons.
Merck filed its suit against the US 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 US$4.8 billion in that first year.
Merck’s top selling drug, cancer immunotherapy Keytruda, could be subject to negotiations as soon as 2028. Last year, Keytruda sales were over US$20 billion — more than a third of Merck’s total sales — and are expected top US$30 billion in 2026, according to analyst estimates. — Reuters
