By: David Ostrowsky and Jessie Boyle
The globally recognized, multi-billion-dollar pharmaceutical company Merck & Co. sued the U.S. government on June 6th in an effort to halt the Medicare drug price negotiation program contained in the Inflation Reduction Act. The drug negotiation program aims to form agreements with drugmakers to lower costs on their most expensive drugs, which will save billions of dollars for Americans, particularly those on Medicare, while sapping Big Pharma of billions in potential revenue. In the first attempt by a drugmaker to challenge the law, Merck is pushing to be declared exempt from the drug price negotiation program, which they claim would lower their drug prices by 25 to 60 percent below market value.
The lawsuit by Merck & Co. was filed against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), as well as HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure. The lawsuit argues that under the new law, drugmakers would be forced to negotiate prices for drugs below market rates – a violation of the Fifth Amendment, which requires the government to pay just compensation for private property that is acquired for public use. Not only does Merck feel that it was forced to the negotiation table under the guise of voluntary participation, but the global pharmaceutical behemoth also believes that the First Amendment’s protection of free speech was breached by it being compelled to sign an agreement conceding the prices are equitable.
Indeed, Merck is bracing for a storm this September when the first-ever Medicare drug price reduction process, accounting for CMS’s 10 most costly drugs, ensues. Following negotiations on said drugs, new prices will go into effect in 2026, potentially slashing industry sales by $4.8 billion in the first year. For Merck, however, 2028 looms as an even more troubling year as its highest-selling drug, cancer immunotherapy Keytruda (last year, Keytruda sales eclipsed $20 billion – more than a third of Merck's aggregate sales), could be subject to negotiations … and a subsequent drastic price reduction. Alas, it’s not just a long-term problem: later this year, Merck’s Type 2 diabetes drug, Januvia, which accounted for $2.8 billion in revenue in 2022, will also be subject to negotiations.
Is Merck’s legal battle – which could find its way to the Supreme Court – an example of proverbial corporate greed? Or is it a good faith effort to not stifle innovation while defending its balance sheet and the best interests of its employees and shareholders? While such questions are debatable, it is readily apparent that HHS will defend Biden’s drug price negotiation law in the name of reduced health care costs for seniors and people with disabilities. After all, this provision in last summer’s landmark Inflation Reduction Act was designed to provide life-altering financial relief for Americans who are already paying much more for prescription drugs than citizens of other countries, many of which have similar price caps in place. As David Mitchell, founder of the advocacy group “Patients For Affordable Drugs Now,” explained in a recent CBS News report: “The reality is, drug corporations that are subject to Medicare’s new authority – and who already negotiate with every other high income country in the world – will engage in a negotiation process after setting their own launch prices and enjoying nine years or more of monopoly profits … Medicare negotiation is a desperately needed, long-awaited rebalancing of our drug price system that will help millions of patients obtain the medications they need at prices they can afford while ensuring continued innovation.”
To Mitchell’s point, of the nearly 60 million Americans currently enrolled in Medicare, an overwhelming majority struggle to balance ever-rising costs of prescription drugs with those of basic necessities (i.e., food, shelter, clothing) -- a situation only exacerbated by recent inflationary pressures. As such, the imminent Medicare drug price negotiation program is a welcome development for the masses: billions of dollars in savings for seniors reliant on prescription drugs will not only improve their lives, but also prolong them.
That said, it appears that Merck will not be stopped from having its day in court.