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Jacob Borzycki | Norphoto | Getty Images
Global Pharmaceutical Company merck On Tuesday, she sued the Biden administration over new Medicare powers to drastically lower drug prices for seniors under the Inflation Reduction Act, the beginning of the drug industry’s efforts to weaken the program.
Merck has called the law’s drug price negotiation program “false” and “amounting to extortion” in a scathing complaint in federal court in Washington, DC.
The company also accused the federal government of employing what the lawsuit describes as an unconstitutional scheme to take private property for public use without just compensation in violation of the Fifth Amendment.
Merck’s complaint asks the judge to stop the US Department of Health and Human Services from forcing the drug company to participate in the program.
Merck last year generated $2.8 billion in revenue from type 2 diabetes drug Januvia, a drug it said would be subject to Medicare price negotiations in 2023.
The company also expects its flagship cancer immunotherapy Keytruda and its other diabetes drug Janumet to come under the program in subsequent negotiation cycles. The drugmaker reported $21 billion in sales from Keytruda in 2022 and $1.7 billion in sales from Janumet.
Keytruda accounted for 35% of Merck’s total revenue last year.
In response to Merck’s lawsuit, HHS Secretary Xavier Becerra said, “We will vigorously defend the President’s Drug Price Negotiation Act, which really lowers healthcare costs for seniors and people with disabilities.”
“The law is on our side,” said Becerra, whose department oversees Medicare, the federal health coverage program for older Americans and people with Social Security disabilities.
Nearly 60 million Americans are enrolled in Medicare.
The Inflation Reduction Act, which became law last summer, was a major victory for President Joe Biden and Democrats in Congress, who have long sought to enable Medicare to combat soaring drug prices.
The pharmaceutical industry was fiercely opposed to the law, arguing that it would hinder the development of new drugs.
Merck said in its lawsuit that HHS applies the law to force companies to enter into negotiations and dictate drug prices that are 25% to 60% below the market price of the drugs.
If the companies do not comply, they face daily taxes of several times the daily revenue of the property, according to the lawsuit.
“Under the Irish Rehabilitation Act, patented Merck pharmaceutical products will be required by the government and transferred to Medicare beneficiaries through compulsory sale,” the complaint says.
“Those forced sales—forced by the threat of draconian penalties and which the government admitted could not afford any manufacturer whatsoever—would deprive Merck of possession and ownership of its personal property.”
Merck has also argued that Medicare’s new rate negotiation powers violate the company’s First Amendment rights to free speech.
The drugmaker alleged that the IRA was forcing companies to engage in “political deception” that presented the program as negotiating fair prices.
“Recruiting corporations to legitimize government racketeering is the kind of parrot orthodoxy prohibited by the First Amendment’s forced speech doctrine,” the complaint says.
But the AARP, the influential lobby group representing people over 50, said the Medicare price negotiations would save billions of dollars for seniors, many of whom can’t afford their prescription drugs.
Bill Sweeney, chief lobbyist for AARP, has accused the drug industry of fighting to “cease profits” while Americans face the world’s highest drug prices.
“Seniors and taxpayers are tired of being the piggy bank of Big Pharma’s profits,” Sweeney said in a statement Tuesday. “Lawsuits like this are just an attempt to keep profits high by manipulating America’s senior citizens.”
Under the Reducing Inflation Act, HHS will select 10 drugs to be drawn into the first round of price negotiations. These drugs will be some of the drugs that Medicare Part D spends the most money on and has no generic competition.
Medicare Part D is the program that covers the cost of medicines that older people usually get from pharmacies.
The Centers for Medicare and Medicaid Services will publish a list of drugs selected for the first round of negotiations on September 1. The companies that make these drugs face an October deadline to sign agreements to participate in those negotiations.
CMS will send the initial bid for the first round of price negotiations on February 1, according to a schedule published by HHS. The drugmakers will have 30 days to accept that price or make a counteroffer, according to the department.
Negotiations end on August 1, 2024, and CMS will publish a list of the reduced prices in the following month, depending on the schedule. These prices go into effect on January 1, 2026, according to HHS.
The program would expand in later years to Medicare Part B, which generally covers medications and treatments that older adults can’t manage at home on their own.
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