Recently, Merck & Co sued the United States Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) over the Drug Price Negotiation Program in the Inflation Reduction Act, arguing it violates the Fifth and First Amendments to the United States Constitution. HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure are also named as defendants in their official capacity.
Merck cited its drug Januvia as one that is likely going to be subject to the Program starting in September 2023, as it is one of the ten most widely reimbursed drugs within Medicare Part D. Merck used that as one reason to prove it has standing to sue as there is “an actual controversy between the parties.” Merck also referenced its drugs Janumet and Keytruda, which are expected to be part of the Program in future cycles.
Merck refers to the Program as a “sham,” stating that it “involves neither genuine ‘negotiations’ nor real ‘agreements.’ Rather, once HHS unilaterally selects a drug for inclusion in the program, 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.”
Merck alleges that the government negotiating payment rates below the market price is a violation of the Fifth Amendment, which requires the government pay just compensation for private property when taken for public use. The complaint states, “The IRA wields the threat of crippling penalties to force manufacturers to transfer their patented pharmaceutical products to Medicare beneficiaries, for public use. And the Act costumes these seizures as ‘sales’ by forcing manufacturers to accept Government-dictated payments that represent a fraction of the drugs’ fair value.”
Merck also argues that the Program would force manufacturers to sign agreements that say their prices are fair, “coercing manufacturers into becoming mouthpieces for the Government’s public-relations campaign,” an alleged violation of the First Amendment’s protections of free speech.
Merck goes on to note that the Program is enforced “through excise taxes and monetary penalties, not exclusion from federal benefit programs,” and that manufacturers have not “voluntarily subjected themselves to the Program by accepting reimbursements from Medicare and Medicaid.”
Additionally, Merck cites the Congressional history of Medicare Part D, saying that in 2003, when Part D was created, Congress “prohibited HHS from ‘interfer[ing] with the negotiations between drug manufacturers’ and buyers.” Merck goes on to say that the changes in the Inflation Reduction Act are a “radical new course” and “fundamentally transform Medicare, replacing voluntary market transactions with forced sales coerced by the threat of staggering penalties.”
Merck has asked the Court for an injunction, to stop the rules from going into effect.
Reactions
The Biden Administration is not backing down from its position, however. White House spokeswoman Karine Jean-Pierre released a statement, saying, “”Big Pharma regularly forces Americans to pay many times what they do customers in other countries for the exact same medicines.” She went on to say, “we are confident we will succeed in the courts. There is nothing in the Constitution that prevents Medicare from negotiating lower drug prices.”
According to Reuters, Ameet Sarpatwari, a lawyer and professor at Harvard Medical School, believes that Merck’s case and legal argument is relatively weak. He says, “the government is not coercing Merck. It is exercising its rights and responsibility to negotiate on behalf of seniors and taxpayers the prices of a small number of drugs that have already been on the market for several years.”
Merck stands strong on its position, however, saying it will litigate all the way to the Supreme Court, if necessary.