Merck & Co – known as MSD outside the US and Canada – has filed a lawsuit against the US government over the Medicare drug price negotiation element of President Biden’s Inflation Reduction Act (IRA).
The IRA, which was enacted last year, allows Medicare – the government health plan for older adults – to negotiate lower prices for a selected group of prescription medicines.
Merck argues that this violates the part of the Fifth Amendment to the US Constitution that requires the government to pay just compensation if it takes private property for public use.
The lawsuit, filed in the US District Court for the District of Columbia, also argues that companies will be forced to sign agreements conceding that the prices are fair, which the drugmaker claims is a violation of the First Amendment’s protections of free speech.
“These constitutional violations cannot be swept under the rug by pretending that manufacturers have voluntarily subjected themselves to the programme by accepting reimbursements from Medicare and Medicaid,” the complaint says.
It continues: “… once the Department of Health & Human Services (HHS) unilaterally selects a drug for inclusion in the programme, its manufacturer is compelled to sign an ‘agreement’ promising to sell the drug to Medicare beneficiaries at whatever ‘fair’ price the agency dictates, which must represent at least a 25% to 60% discount.
“If a manufacturer refuses to participate in this ‘negotiation’ or declines to ‘agree’ to sell at the mandated price, it incurs a ruinous daily excise tax amounting to multiples of the drug’s daily revenues.”
A list of the first ten Medicare Part D drugs selected for negotiation is expected to be published by the government in September, according to the Centers for Medicare and Medicaid Services, with the new prices set to be effective in 2026.
The government recently announced the first set of Medicare Part B drugs subject to penalties under the IRA because their prices rose faster than the rate of inflation.
HSS secretary, Xavier Becerra, said at the time of the announcement: “The Biden-Harris administration believes people with Medicare shouldn’t be on the hook when drug companies inexplicably jack up the prices of their drugs.”
“With the inflation rebate programme, we are fighting to ensure seniors can afford the treatments they need, taxpayers aren’t subsidising drug company excess prices, and the Medicare programme is strong for millions of beneficiaries now and in the future,” Becerra said.