Merck is suing over law that allows Medicare to negotiate with drugmakers
The pharmaceutical company Merck sued the federal government on Tuesday over legislation that would allow Medicare to negotiate prices directly with drug manufacturers for the first time.
Merck’s lawsuit, filed in federal court in Washington, is the drug industry’s most significant move to date to fight back against a substantial health policy change set to take effect in 2026. a provision of the Inflation Reduction Act, which defines it as a way to lower drug prices.
Only a few drugs will be negotiated with Medicare and only after they have been on the market for years without competition. But in public remarks, pharmaceutical executives have portrayed the Medicare negotiation program as a serious threat to new cures. Several said yes judge again their drug development plans.
In the Merck lawsuit, the company’s lawyers argue that the Medicare bargaining program is unconstitutional. They argue that the program would force Merck to provide its products at prices set by the government, in violation of a Fifth Amendment clause that prohibits the government from using private property for public use without just compensation. They also allege that the program would violate Merck’s First Amendment rights by forcing the company to sign an agreement that it did not agree to after negotiations were completed.
According to the federal government’s guidance on its plans to implement the program, the process will allow drugmakers to first make a counteroffer on pricing and later reject Medicare’s final offer and walk away without a deal if they’re not satisfied are subject to a tax.
In September, the government plans to announce the first 10 drugs to be negotiated in 2026. A common Merck drug for diabetes known as Januvia is probably on that list.
The program could also affect Merck’s long-term plans for its golden goose, popular cancer drug Keytruda. It could be one of the first products targeted when negotiations begin in 2028 on drugs administered in a healthcare setting.
The current version of Keytruda, administered as an IV, will face competition for the first time that same year, so sales are expected to decline whether or not the program is targeted. But Merck had expected to generate significant revenue from a new formulation of Keytruda it is developing that is more easily administered subcutaneously. This can also be negotiated as part of the government’s plans for the programme.
Merck said in a statement Tuesday that the law “unlawfully detracts from our core purpose of engaging in innovative research that saves and improves lives.” Last year, the company posted a profit of $14.5 billion.