Pharmaceutical powerhouse Merck has filed a major lawsuit against the federal government over its plan to force manufacturers of the most expensive drugs to lower prices.
The bargaining provision was part of last year’s key piece of legislation, the Inflation Reduction Act, forcing companies to negotiate price cuts on some of the most expensive drugs with Medicare, the government-run health care program for seniors 65 and older.
Merck, which expects its diabetes drug Januvia to be among the first tranche of 10 drugs whose prices will be discussed, has equated the law with “extortion,” adding that it violates the company’s rights to first and foremost fifth amendment.
President Biden’s secretary for the Department of Health and Human Services, Xavier Becerra, said he and the administration’s team of attorneys will fight “vigorously” to defend the drug pricing provision, which will impose financial penalties on companies refusing to meet during negotiations. table.
This is the first legal challenge brought against the government over the rule. It is expected to be one of many, signaling that the industry is poised to fight tooth and nail against price cuts it believes will hinder innovation.
Merck’s diabetes drug Januvia is expected to be one of 10 expensive drugs being negotiated with the federal government over price, a move drug companies have fought against for years because it would affect their bottom line
The chart shows that Merck’s blockbuster drug Keytruda has been a major cash cow, consistently making the company more money, with billions in sales in one quarter
Merck argued in the lawsuit: ‘This ‘drug price negotiation program’ is a sham… If a manufacturer refuses to participate in this ‘negotiation’ or refuses to ‘agree’ to sell at the imposed price, it will have to pay a disastrous daily excise tax that multiple of the price of the drug. daily income.
“This is not a ‘negotiation’. It is tantamount to extortion. And it violates the Constitution in at least two obvious ways.’
The company accused the federal government of infringing on its First Amendment rights by forcing it to participate in a “facade of negotiations and agreements” that aren’t agreements at all, because Merck would never voluntarily sign those contracts.
The complaint goes on to read: “Enlisting corporations to legitimize government extortion is the kind of parroted orthodoxy that the First Amendment’s coerced speech doctrine prohibits.”
Merck also alleges that the government violated its Fifth Amendment protections against taking and selling their private property—the formulations for their drugs—without “just compensation.”
The company adds: “The law masquerades these seizures as ‘sales’ by forcing manufacturers to accept government-dictated payments that represent a fraction of the real value of the drugs.
By definition – and by design – it is not ‘just compensation’. On the contrary, requisitioning medicines from manufacturers in this way is a classic in itself.’
Legal experts have cast doubt on the strength of Merck’s case.
Ameet Sarpatwari, a lawyer and professor at Harvard Medical School, told Reuters, “The government is not forcing Merck. It exercises its rights and responsibility to negotiate on behalf of seniors and taxpayers the price of a small number of drugs that have been on the market for several years.’
In September, the government will announce the first 10 drugs to be negotiated from 2026. The bargaining provision gives Medicare the power to select the drugs that cost the government the most to cover.
Merck’s diabetes drug Januvia is a contender for the first round of picks with a Medicare cost of approx $4 billion in 2020 alonein addition to the blood thinners Eliquis and Xarelto, which cost the federal government nearly $10 billion and $5 billion, respectively, to cover.
Merck’s other top earners Janumet and the cancer blockbuster Keytruda — with a list price of about $175,000 per patient per year — are expected to enter negotiations as early as 2028.
Proponents of the price-bargaining mechanism, including Vermont’s Progressive Senator Bernie Sanders, an independent who consults with the Democrats, accused Merck of inflating prices.
Sen. Sanders saidMerck wants to end Medicare’s ability to negotiate certain drug prices. This is why. The diabetes drug, Januvia, costs $6,600 a year in the US, but only $192 in France. The cancer drug, Keytruda, costs $187,000 in the US, but only $87,000 in Germany.”
Meanwhile, Democratic Representative Frank Pallone, who heads the House Energy and Commerce Committee, called the lawsuit ‘outrageous’.
Rep. Pallone, whose committee has jurisdiction over health matters, said, “Enabling Medicare to negotiate fair drug prices for seniors is not only clearly constitutional, but necessary if lifesaving drugs are to remain available to all Americans.
“The only rights being violated here are those of the American people who have been defrauded for years by Big Pharma companies like Merck.”
The problem of skyrocketing prescription drug prices is uniquely American, comparable to gun violence and medical debt. Americans pay about two to six times what the rest of the industrialized world pays for the same prescription drugs, despite similar personal incomes.
Unlike most peer countries, the US government leaves pricing to market competition. Certain brand-name drugs have exclusivity, meaning the manufacturer can keep them on the market for a certain number of years without their profits being threatened by similar generics coming to market.
Without competing generics and biosimilars on the market, drugmakers can drive prices up to astronomical levels, translating into higher out-of-pocket costs for patients.
Ultimately, Americans give one average about $164 out of pocket on prescription drugs. Meanwhile, Germans pay about $55, the Japanese about $94, and people in the UK pay $12.
The pharmaceutical industry and many Republicans argue that allowing Medicare to exert downward pressure on prices could be a death knell for innovation as the financial incentive to develop the next breakthrough drug would disappear.
The Biden administration is preparing for a fight. White House press secretary Karine Jean-Pierre told reporters that officials are “confident that we will succeed.”
Ms Jean-Pierre added: ‘Whenever the pharmaceutical industry’s profits are compromised, they make claims that it hinders their ability to innovate. These arguments are not only untrue, but the American people do not believe them.”