The drugmaker Merck on Tuesday sued the federal government over Medicare’s plans to negotiate lower drug prices on behalf of taxpayers and seniors under the Inflation Reduction Act.
Merck said the price negotiations are a “sham” that compel drugmakers to accept lower prices and violate the company’s constitutional rights under the First and Fifth amendments, according to the lawsuit filed in U.S. District Court in Washington D.C.
The Inflation Reduction Act, passed by Congress last year, grants the federal health program that serves older adults and disabled people the authority to negotiate drug prices. The Centers for Medicare and Medicaid Services will select the first 10 drugs to negotiate later this year but price changes won’t begin until 2026.
In the lawsuit, Merck said drugmakers must accept price cuts of 25% to 60% or pay a “ruinous daily excise tax” for selected drugs. The negotiation will force the drugmaker to “sell its most valuable products for a fraction of their value,.”
“This is not ‘negotiation,'” the lawsuit states. “It is tantamount to extortion.”
What’s at stake for Merck?
In the lawsuit, Merck said its diabetes drug Januvia will be subject to negotiation beginning September 2023 because it’s among the 10 most widely reimbursed drugs within Medicare Part D. The company expects two other drugs − the cancer blockbuster Keytruda and the diabetes medication Janumet − will be subject to Medicare negotiation later.
Medicare has said it will select the first 10 drugs by Sept. 1, before starting negotiations next year. By September, 2024, Medicare will publish prices that will take effect Jan. 1, 2026. Over the following two years, the federal health program will target another 30 retail and physician-administered drugs.
Retail drugs are eligible only after they have been on the market for nine years without a competing generic version. Physician-administered drugs will have 13 years before being subject to negotiation.
What does Merck want?
In the lawsuit, Merck asks the court to:
∎ Declare price negotiations are “takings” without “just compensation” under the Fifth Amendment.
∎ Find drug price negotiations compel speech in violation of the First Amendment.
∎ Prevent the federal government from forcing Merck to sign an agreement or accept negotiated prices.
∎ Declare price negotiations under threat of penalties to be null and void.
Contact health reporter Ken Alltucker at alltuck@usatoday.com
