Drug Maker Merck Sues US Gov. Over Inflation Reduction Act

(Photo Credit: Hal Gatewood/Unsplash)
(Photo Credit: Hal Gatewood/Unsplash)

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The war on drug prices faces a counter-offensive.

While many pharmaceutical companies have been moaning and groaning about the new regulations on the industry imposed by the Inflation Reduction Act last year, one has taken action. On Tuesday, Merck & Co. filed a lawsuit against US health agencies, calling the bill’s price negotiation policies a “sham” and unconstitutional.

Goliath vs Goliath

The driving goal of the IRA is to make it cheaper and easier to live in America. Part of the bill targets prescription drugs, specifically those covered by Medicare — the federal health insurance for seniors. New policies include allowing the Department of Health & Human Services to negotiate prices for certain expensive drugs, requiring pharmaceutical companies to pay rebates if their prices rise faster than inflation, and capping the monthly out-of-pocket cost of insulin to $35, among other provisions. That’s a boon for older citizens living with chronic ailments. Plus, the federal government hopes it will save nearly $100 billion on drug payments by 2031. But pharma giants are obviously not as enthusiastic.

Last month, Pfizer CEO Albert Bourla called the drug pricing reforms “negotiation with a gun to your head,” arguing it will hurt profits and delay the development of innovative medicines. Novartis CEO Vas Narasimhan had similar words in February, telling shareholders the policies will put an unnecessary burden on the creation of drugs. The furor was all building toward a lot of billable hours for lawyers:

  • Merck jumped into the fray because two of its flagship medications — Keytruda and Januvia, which treat cancer and diabetes, respectively — are likely to be included in the drugs Medicare plans to negotiate new prices for in the next few years. Combined, both drugs are responsible for tens of billions of dollars toward Merck’s bottom line, but the negotiations are expected to trim 5% from the company’s revenue in the first year of bargaining, according to Bloomberg.
  • Merck argues that the IRA violates the Fifth and First Amendments by essentially taking property for public use but not offering just compensation while also forcing companies to agree to government pricing or risk high taxes or monetary penalties. In the lawsuit, Merk called the whole situation “government extortion.”

You Owe Me Money: In addition to price negotiation policies, Washington is working on other ways to get cash back from pharmaceutical companies. In two notable fraud cases, whistleblowers claimed Safeway and SuperValu were offering discounts on prescriptions to customers who were paying out of pocket, while knowingly charging the government (and taxpayers) more for drugs covered by Medicare and Medicaid. A lower court sided with the companies, but just last week, the Supreme Court threw out that ruling in an attempt to revive the cases. Now might be the time for Supervalu and Safeway to slip their arms in one of the blood pressure machines in their stores.