Merck Sues Biden Administration Over Drug Pricing Law

Pictured: A sign with the Merck logo surrounded by yellow flowers in front of a glass building / iStock, hapabapa

Pictured: A sign with the Merck logo surrounded by yellow flowers in front of a glass building / iStock, hapabapa

Merck & Co. on Tuesday filed a lawsuit against the Biden administration in the U.S. District Court for the District of Columbia, challenging the constitutionality of the Inflation Reduction Act that deals with drug price negotiation.

The company argued that the program would force biopharma companies to negotiate prices below market value for drugs covered by Medicare, thereby violating the First and Fifth Amendments. Merck contended that the Fifth Amendment, in part, requires just compensation from the government for the public use of private property and that by forcing companies to acknowledge that prices are fair, the drug price negotiation program flies in the face of the First Amendment’s protections of free speech.

Merck is seeking an injunction to the newly enacted requirement. “Because this statute unlawfully impairs our core purpose of engaging in innovative research that saves and improves lives, Merck intends to litigate this matter all the way to the U.S. Supreme Court if necessary,” Robert Josephson, a Merck spokesperson, said in a statement, according to Politico.

President Biden signed the Inflation Reduction Act (IRA) into law last August. It aims to reduce the costs of drugs by $25 billion annually over the next eight years, starting this September when the Centers for Medicare & Medicaid Services (CMS) will announce the 10 drugs that cost the government agency the most money. In the lawsuit, Merck noted that its diabetes drug Januvia is expected to be on the list. Last year, Januvia brought in $2.8 billion.

Newly negotiated prices for these first 10 drugs will go into effect in 2026 and are projected to cut industry profits by $4.8 billion in the first year, Reuters reported. The biopharma industry has argued that the program will result in slowed drug development as a result of these profit losses.

In subsequent rounds, Merck expects that more of its drugs will be subject to negotiation. These include its blockbuster cancer immunotherapy Keytruda, which earned the company $21 billion last year (35% of the company’s total revenue), and its other diabetes drug Janumet, which brought in $1.7 billion.

The company’s lawsuit, specifically filed against the U.S. Department of Health & Human Services (HHS) and CMS, as well as the two agencies’ leaders, stated that “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. This is political Kabuki theater.”

Companies have previously raised First Amendment challenges in drug pricing cases, such as a 2019 HHS rule to mandate the inclusion of pricing in DTC ads, but the court vacated that rule on other grounds.

Jef Akst is managing editor of BioSpace. You can reach her at jef.akst@biospace.com. Follow her on LinkedIn and Twitter @JefAkst.

Correction (June 8): This story has been updated to remove the incorrect statement that the 2019 HHS rule was overturned on the grounds of First Amendment violations, as reported by Endpoints News. In fact, the court did weigh in on the First Amendment arguments used by the plaintiffs but instead stated that CMS never had the authority to issue the rule in the first place.

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