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Global drugmaker Merck on Tuesday sued the Biden administration over Medicare’s latest powers to substantially reduce drug prices for seniors under the Inflation Reduction Act, the opening salvo within the pharmaceutical industry’s efforts to weaken this system.
In a scathing criticism filed in federal court in Washington D.C., Merck excoriated the negotiation process as a “sham” and “tantamount to extortion.”
The drugmaker accused the federal government of employing what the corporate described as an unconstitutional scheme to take private property for public use without just compensation in violation of the Fifth Amendment.
The Inflation Reduction Act, which became law last summer, was a significant victory for President Joe Biden and Democrats in Congress, who’ve long pushed to empower Medicare to combat rising drug prices.
The pharmaceutical industry has fiercely opposed the law, arguing it would stifle latest drug development.
Merck said the Department of Health and Human Services compels firms to enter into an agreement that effectively dictates the worth of a drug at a 25% to 60% discount under threat of each day excise taxes which might be several times higher than the medication’s each day revenue.
Merck has asked a judge to dam HHS from compelling the drugmaker to take part in this system.
“Under the IRA, the Government will requisition Merck’s patented pharmaceutical products and transfer them to Medicare beneficiaries through forced sales,” the corporate’s legal team wrote within the criticism.
“Those forced sales—coerced by the specter of draconian penalties that the Government has admitted no manufacturer could ever rationally afford to pay—will deprive Merck of possession and title to its personal property,” Merck’s attorneys wrote.
Merck also argued in its lawsuit that Medicare’s latest powers to barter prices violate the corporate’s free speech rights under the First Amendment. The drugmaker claimed the Inflation Reduction Act forces firms to take part in a “political deception” that presents this system as a negotiation for fair prices.
“Conscripting firms to legitimize government extortion is the kind of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids,” Merck’s attorneys wrote.
The American Association of Retired Individuals, in an announcement to CNBC, said the Medicare negotiations will save billions of dollars for seniors, lots of whom cannot afford their prescribed drugs.
Bill Sweeney, the AARP’s chief lobbyist, accused the pharmaceutical industry of fighting to “pad their profits” while Americans face the very best drug prices on the planet.
“Seniors and taxpayers are bored with being the piggy bank for the profits of huge drug firms,” Sweeney said. “Lawsuits like this are simply an try to keep high profits by gouging America’s seniors.”
Under the Inflation Reduction Act, HHS will select 10 drugs to be drawn right into a first round of price negotiations. Those drugs might be some that Medicare Part D spends essentially the most money on and that haven’t any generic competition.
Medicare Part D is this system that covers the fee of medication that seniors typically pick up in pharmacies.
The Centers for Medicare and Medicaid Services will publish a listing of which drugs were chosen for the primary cycle of negotiations on Sept. 1. The businesses that make those drugs face an October deadline to sign agreements to take part in those negotiations.
Merck said its Type 2 diabetes drug Januvia might be subject to a negotiation agreement this yr. The drugmaker booked $2.8 billion in revenue from that medication last yr, in response to financial filings.
Merck also anticipates its blockbuster cancer immunotherapy treatment Keytruda and its other diabetes drug Janumet might be subject to this system in subsequent negotiation cycles. The drugmaker booked $21 billion in sales from Keytruda in 2022 and $1.7 billion in sales from Janumet.
Keytruda represented 35% of Merck’s total revenue last yr.
CMS will send its initial price offer for the primary round of price negotiations on Feb. 1, 2024, in response to a timeline published by HHS. The drugmakers have 30 days to simply accept that price or submit a counteroffer, in response to the department.
The negotiations end on Aug. 1, 2024, and CMS will publish a listing of the reduced prices that September, in response to the timeline. Those prices go into effect on Jan. 1, 2026, in response to HHS.
This system will expand in subsequent years to Medicare Part B, which generally covers drugs and coverings that seniors cannot administer at home on their very own.
CNBC has reached out to HHS and the White House for comment.
