MSD Files Lawsuit Against US Government

Merck Sharp & Dohme (MSD) has filed a lawsuit against the US government over the Drug Price Negotiation Program included in the Inflation Reduction Act (IRA), claiming that it violates the First and Fifth Amendments. The lawsuit describes the negotiation program as “sham” and “tantamount to extortion.”

The Inflation Reduction Act was passed by the US Senate in 2022 and includes provisions that allow Medicare to negotiate the prices it pays for certain medicines. Ten medicines were to be selected initially, with the negotiation process due to begin in September 2023 and the new prices coming into effect in 2026. 

MSD argues that there is no negotiation in the prices. The lawsuit says, “Once HHS [Department of Health and Human Services] unilaterally selects a drug for inclusion in the program, its manufacturer is compelled to sign an ‘agreement’ promising to sell the drug to Medicare beneficiaries at whatever ‘fair’ price the agency dictates, which must represent at least a 25% to 60% discount. If a manufacturer refuses to participate in this ‘negotiation’ or declines to ‘agree’ to sell at the mandated price, it incurs a ruinous daily excise tax amounting to multiples of the drug’s daily revenues.”

The company’s lawsuit also points to how the First and Fifth Amendments are violated:

• “The Fifth Amendment requires the Government to pay ‘just compensation’ if it takes ‘property’ for public use. Yet the singular purpose of this scheme is for Medicare to obtain prescription drugs without paying fair market value.”
   
• “The IRA instead operates through a façade of ‘negotiations’ and ‘agreements’ that require manufacturers to convey that they ‘agree’ to HHS’s ‘fair’ prices. The only conceivable purpose of this circuitous regime is political deception – to allow the Government to pretend, as it already has done, that HHS’s prices are not top-down mandates but the product of voluntary ‘agreements’ with companies who concede they are ‘fair.’ Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids.”

The New York Times has published an analysis claiming that the constitutional arguments may face an uphill battle in court. The not-for-profit advocacy group Public Citizen also thinks the lawsuit will be difficult – going so far as to describe it as “desperate.” David Mitchell from Patients for Affordable Drugs said, “Want to know how frivolous the Merck anti-Medicare negotiation lawsuit claims are? One expert put it this way: There are ‘better odds that Elizabeth Holmes wins Medtech Innovator of the Year than that Merck wins its lawsuit.’”

However, it seems that more pharma companies may bring their own lawsuits forward. When details of the negotiation process were published earlier this year, Reuters claimed that six industry sources had already indicated that the program may violate the US Constitution. Rumour also has it that Biogen may be looking to join MSD with its own lawsuit.

A few days before the lawsuit was announced. PhRMA also weighed in with its own view of the IRA – claiming that analysis showed it would have a negative impact on the R&D of new cancer medicines. In a statement, PhRMA said, “The majority of cancer medicines approved by the FDA are small molecule medicines, which patients may prefer because they are easier to take than an infusion or a shot. Under the IRA, these medicines can be selected for government price setting just seven years after they’ve first been approved by the FDA, with the price effective two years later. Initiating government price setting so early in their lifecycle ignores the real-life impact these medicines bring to patients and discourages companies from researching and developing them at all.”

PhRMA has also published extensively on the “unintended consequences” of the IRA.

A number of US politicians have responded to the lawsuit. Frank Pallone calls it “outrageous.” He says, “The only rights that are being violated here are those of the American people who have been getting ripped off by Big Pharma companies like Merck for years.”

Responses from others include:

Adam Schiff: “Merck’s lawsuit against Medicare drug price negotiations is an egregious prioritization of profit over patients.”

Patty Murray: “This lawsuit could prevent millions of Americans on Medicare from benefiting from lower prescription drug prices. People are sick and tired of big pharma protecting their profits at the expense of patients' health.”

Elizabeth Warren: “A giant drug company claims to have a constitutional right to charge Medicare whatever it wants – and taxpayers must pay up. You can’t make this stuff up. President Biden and Democrats in Congress fought hard for Medicare to negotiate lower drug prices and the law is on our side.”

And what about views from the general public? As you can imagine, the lawsuit has not been well received – and the comments on social media are far too “vibrant” to include here. 

All exciting stuff. But do you know what I’d love to hear? Your honest views. 

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