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Merck sues US government for Medicare drug price negotiations, alleging extortion.

Merck sues US government for Medicare drug price negotiations, alleging extortion.

Pharmaceutical company Merck has filed a lawsuit against the US federal government, accusing it of extortion over its plan to negotiate Medicare drug prices. The program, outlined in the Inflation Reduction Act, is expected to save taxpayers billions of dollars over the coming years. But Merck argues that the program does not involve true negotiation. Instead, the US Department of Health and Human Services selects drugs to be included, dictates the price, and threatens drugmakers with a “ruinous daily excise tax” if they don’t agree. Merck believes the program violates the US Constitution’s Fifth Amendment, which requires that the government pay “just compensation” for property taken for public use.

Merck expects its diabetes treatment Januvia to be part of the scheme, which the company says involves no actual negotiations and violates elements of the US Constitution. The lawsuit names Health and Human Services Secretary Xavier Becerra, his department, and administrator of the Centers for Medicare and Medicaid Services, Chiquita Brooks-LaSure, as defendants.

While the US government plans to “vigorously defend” the drug price negotiation plan, Merck argues that Congress could have allowed Medicare to negotiate a maximum price for drugs or to use its leverage to negotiate. Instead, the government uses the threat of severe penalties to appropriate drugs and refuses to pay fair value, forcing drugmakers “to smile, play along, and pretend it is all part of a ‘fair’ and voluntary exchange.”

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Republican lawmakers have also criticized the plan, fearing that it could discourage drugmakers from introducing new drugs that could be subjected to haggling. The federal government intends to soon release rules for negotiating drug prices, with negotiations on the prices of 10 drugs starting next year. The plan marks the first time that the federal government will directly bargain with drug companies over the price they charge for some of Medicare’s costliest drugs, with negotiated prices set to take effect in 2026.

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