Merck files lawsuit against US government over Medicare Drug Price Negotiation Program – will others follow?

Last week, Merck became the first company to file a lawsuit against the US government over the drug price negotiation program required under the Inflation Reduction Act. 

Implementation of the Inflation Reduction Act (IRA) continues to spark much debate and discussion in the US, with the narrative changing weekly. In the latest development, pharmaceutical giant Merck & Co. has announced they are suing the Department of Health and Human Services (HHS) over the ‘unconstitutional provisions’ made under the IRA to lower the prices of prescription drugs. 

Merck’s blockbuster Type 2 diabetes drug Januvia is expected to be among the first 10 drugs to be subject to the Medicare Drug Price Negotiation Program when it comes into force in 2026. In their lawsuit filed June 6, 2023, Merck claims the program, established by the Centers for Medicare & Medicaid Services (CMS) to fulfil the requirements laid down by the IRA, violates the First and Fifth Amendments to the US Constitution. Merck argues that the IRA violates the Fifth Amendment by taking property without ‘just compensation’ and the First Amendment by compelling them to sign an agreement that conveys the government-set prices are the ‘fair result of a ‘negotiation.’ 

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For full details on the IRA and its impact on drug pricing – see our coverage here.

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In their statement, Merck cite the effect the IRA will have on biopharmaceutical innovation and resulting ‘devastating consequences’ this will have for patients. 

“Patients and the public need biopharmaceutical innovation to address global health challenges like cancer and Alzheimer’s disease, and the IRA is negatively affecting critical research and development. By changing the incentives and returns for some therapies and technologies over others, the IRA is changing the course of R&D, which in time will leave many patients without treatment options.” 

Like Merck, many pharmaceutical companies have argued that the drug price negotiation program will stifle innovation and lead to higher prices for new drugs. Biogen CEO Chris Viehbacher and Novartis CEO Vas Narasimhan have recently voiced their concerns. Pfizer CEO Albert Bourla has also previously stated legal action was likely to be needed, declaring the plan was ‘negotiation with a gun to your head.’ The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents many of the leading biopharmaceutical research companies in the US, echoes many of these sentiments, exclaiming in their feedback on CMS’ Medicare Drug Price Negotiation Program proposals that, ‘What the drug pricing provisions of the IRA require is not “negotiation”.’ 

As yet, no other company has followed in Merck’s footsteps and filed their own lawsuit.