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Pharmaceutical Sues to Stop Medicare Price Negotiation

Merck, a pharmaceutical company, filed a lawsuit against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services (CMS). The lawsuit claims that the Medicare drug price negotiation process in the Inflation Reduction Act (IRA) violates the U.S. Constitution. Merck requests an injunction from the U.S. District Court for the District of Columbia to stop the negotiation rule from becoming effective within the upcoming months.

This is the first attempt by a major drugmaker to challenge the law, claiming the drug negotiation process will result in a loss of profits that will force them to pull back from developing important new treatments. It is notable that Merck’s blood sugar medication, Januvia, is expected to be amongst the first 10 drugs selected for negotiations in September and its cancer drug and diabetic treatment to be selected in the future.

The lawsuit

The IRA’s negotiation process permits the federal health secretary to negotiate the prices of certain expensive drugs for Medicare each year. The CMS plans to release a list of the first ten drugs for negotiations on Sept 1, 2023, though the negotiated prices won’t become effective until 2026.

Merck claims that the law’s negotiation process will violate the Fifth Amendment, requiring the federal government to provide “just compensation” for property taken for public use. Additionally, the company argues that the process violates freedom of speech because the IRA forces companies to sign agreements stating prices are fair.

Effects of the lawsuit

Since the CMS has not identified the drugs that will be subject to the first round of negotiations, it’s uncertain whether Merck has standing to sue. It’s important to note that the lawsuit could affect the Medicare drug negotiation timeline.