Merck & Co. has sued the U.S. government over Medicare’s newly granted authority to negotiate the prices of certain top-selling medicines, intensifying the pharmaceutical industry’s attack on a law that drugmakers claim will hurt their ability to develop innovative therapies.
In a lawsuit filed Tuesday, Merck asked a federal court to declare the new pricing powers unconstitutional and block the government from enforcing their provisions, which were set out in last year’s Inflation Reduction Act. The planned program for setting certain drug prices within Medicare is a “sham,” Merck said, and violates the First and Fifth Amendments of the Constitution.
“This is not ‘negotiation,’” Merck’s lawyers wrote in the suit. “It is tantamount to extortion.” Merck argued further that U.S. law requires the federal government to pay “just compensation,” if takes property for public use, which is how the company described the use of penalties to force drugmakers to agree to lower prices.
In addition, Merck claimed the law’s requirement that manufacturers sign agreements consenting to a drug’s final “fair price” violates the First Amendment’s free speech doctrine.
The pharma industry has spent more than $1 trillion over the past three decades to develop new drugs, Merck said in a statement announcing its lawsuit, adding that the IRA puts this investment at risk.
Merck’s suit was filed against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services, which are developing procedures for the program and plan to name the first 10 drugs for negotiation by early September. Under the IRA, CMS can negotiate prices for up to 140 single-source drugs in Medicare by 2033.
The law’s passage was a major defeat for the U.S. drug industry, which lobbied against and has since warned repeatedly that it will harm drug research and development. A legal challenge was expected, and Merck’s lawsuit is the first attempt by the industry to turn back the law in the courts.
Drug price controls have been a priority for Democrats for decades, and more recently, among some Republicans under former President Donald Trump. The issue has stood out as one of the few areas with bipartisan support in deeply divided D.C. politics, with both drugmakers and pharmacy benefit managers taking criticism this year.
Merck did not hold back in its lawsuit, describing the IRA in particularly blunt terms. “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. This is political Kabuki theater,” the lawsuit stated.
Merck’s top-seller, a cancer immunotherapy Keytruda with $21 billion in sales last year, could potentially fall under the law’s drug pricing provisions when they take effect in 2026.
Editor’s note: This story has been updated with additional details.