Merck accuses US of ‘extortion’ in lawsuit against drug price controls

Merck has sued the US over a law that gives the federal government the power to negotiate prices for some of the most expensive drugs, arguing that key parts of the law are unconstitutional and “amount to extortion”.

The US drugmaker said on Tuesday that the reforms contained in the Inflation Reduction Act, a key part of President Joe Biden’s agenda to reduce the cost of drugs, violate the First and Fifth Amendments to the US Constitution.

“This is not ‘negotiation.’ It is tantamount to extortion. And it violates the Constitution in at least two clear respects,” Merck said in a court filing.

The reforms have been fiercely opposed by the pharmaceutical industry, which has warned they will cripple innovation and hinder the development of life-saving drugs.

Merck’s lawsuit is the first by a major drug company, but analysts predict others may follow its lead and sue the government before full implementation of the drug price negotiation elements of the act later this year.

Under the proposed reforms, Medicare, the US taxpayer-funded healthcare plan for retirees, would be allowed to negotiate prices for a limited number of branded drugs. The process is set to begin in earnest in September when the Centers for Medicare and Medicaid Services (CMS) identify 10 costlier drugs that will be the focus of the conversation.

Additional drugs are to be added to this list in the coming years as the Congressional Budget Office estimates that billions will be saved over the decade.

Merck stated in its lawsuit that in fact the so-called “drug price negotiation program” was a sham because it involved neither actual “negotiations” nor actual agreements. The sole purpose of the scheme was for Medicare to obtain drugs without paying fair market value.

Once the government unilaterally selects a drug for inclusion in the program, its manufacturer is forced to sign an agreement promising to sell the drug to Medicare beneficiaries for whatever “reasonable price” The agency sets the price. This should represent at least a 25 percent to 60 percent discount and if a manufacturer refused to participate in this “negotiation” or “agree” to sell at the mandated price, it was “ruined”. The amount of the daily excise tax it had to pay was a multiple of the drug’s daily revenue, Merck said.

Merck is not the first but probably the last big drug maker to challenge the government, said Chris Meekins, an analyst at Raymond James & Associates.

“Obviously, when you’re talking about a policy that is likely to take $150 billion out of pharma over a decade based on Congressional Budget Office estimates, it was very clear that (the industry) was trying to stop it.” Will sue to do.”

Biogen Chief Executive Officer Christopher Weihbacher told an audience at a biotech conference in Boston that the company would look into whether it should file its own lawsuit against the IRA.

He added that Merck’s claim that the reformulation is an “extortion” is accurate.

Roche told the Financial Times it is reviewing its legal and policy options regarding “the negative effects of the IRA on patients and innovation”.

Legal experts said the challenge to the IRA could find a sympathetic ear from US courts, especially as Merck has indicated it is prepared to fight its case all the way up to the US Supreme Court.

Matt Wetzel, a partner in the life sciences division at Goodwin, a law firm, said Merck’s lawsuit exposed “tremendous elements” of drug pricing reforms, including significant restrictions on drug makers’ ability to appeal CMS decisions. And there was a real shortage involved. Conversation. He said that this could be viewed sympathetically by the US courts.

“One question, however, is whether a court will find that a company has yet to suffer loss or injury as a result of the provisions of the IRA – or whether that loss or injury did not actually occur until September 1 of this year.” Will happen when the first 10 drugs are selected for the programme,” he said.

CMS did not immediately respond to a request for comment.

Additional reporting Hannah Kuchler