Merck sues HHS over drug negotiation, claims program ‘tantamount to extortion’

Pharmaceutical giant Merck sued the federal government on Tuesday to block Medicare drug price negotiations, calling the program unconstitutional.

The complaint, filed against the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, argued that Medicare’s efforts to negotiate certain drug prices is “political Kabuki theater” that is “tantamount to extortion.”

It further described the drug negotiation program, part of the Inflation Reduction Act, as a “dystopian parody of ‘negotiation’” that violates the company's First and Fifth Amendment rights.

The New Jersey-based company is asking the U.S. District Court for the District of Columbia for an injunction to stop the rules from going into effect over the next several months.

“Because this statute unlawfully impairs our core purpose of engaging in innovative research that saves and improves lives, Merck intends to litigate this matter all the way to the U.S. Supreme Court if necessary,” Robert Josephson, a Merck spokesperson, said in a statement.

The White House, HHS and CMS did not immediately respond to a request for comment on the lawsuit.

At issue are the requirements surrounding the Inflation Reduction Act’s negotiation process, in which CMS will negotiate what Medicare pays for 10 widely used, high-priced drugs with no generic competition.

Merck, in its complaint, said the negotiations and the stipulated minimum discounts drugmakers are forced to provide lest they incur a massive tax, run afoul of the Fifth Amendment’s takings clause, which requires the government provide “just compensation” for property taken for public use.

“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 [Inflation Reduction] Act costumes these seizures as ‘sales’ by forcing manufacturers to accept Government-dictated payments that represent a fraction of the drugs’ fair value. By definition — and by design — that is not ‘just compensation,’” the company claimed in its suit.

Merck also argued that, by participating in what it calls “sham negotiations and agreements,” its freedom of speech is being stifled.

“Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids,” the suit said.

Further, the company told the court that the government is stopping Merck from engaging in “counterspeech” about the negotiations following guidance CMS issued in March that prohibits companies from publicly disclosing “any information exchanged verbally during the negotiation period.”

“The IRA uses severe penalties to requisition medicines while refusing to pay their fair value — and then coerces manufacturers to smile, play along, and pretend it is all part of a ‘fair’ and voluntary exchange,” the suit alleges.

The timing is important: CMS is slated to release a list of the first 10 drugs for negotiation on Sept. 1 — less than three months away. Merck’s widely prescribed blood sugar medicine Januvia is likely to be among the medicines chosen. The company said it expects its cancer drug Keytruda and Janumet, a diabetes treatment, will be selected in future rounds.