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Merck Sues HHS Over Medicare's Drug Price Negotiation Program

Merck research facility in South San Francisco, California

NEW YORK – Merck is suing the US Department of Health & Human Services, claiming that a component of the Inflation Reduction Act that would let the Centers for Medicare & Medicaid Services negotiate prices for certain therapies with drugmakers is unconstitutional. 

The lawsuit, filed in the US District Court for the District of Columbia on Tuesday, takes aim at the Drug Price Negotiation Program. The pharmaceutical giant is arguing that once HHS opts to include a drug in the program, companies will be compelled to sign agreements at a price dedicated by Medicare, which Merck argues is coercive. 

"This 'Drug Price Negotiation Program' is a sham," the company said in the complaint. "This is not 'negotiation.' It is tantamount to extortion." In addition to CMS, Merck named HHS, HHS Secretary Xavier Becerra, and CMS Administrator Chiquita Brooks-LaSure as defendants in its lawsuit.

Merck claims that the program violates its free speech rights under the First Amendment, as it allegedly compels the company to sign such agreements. The company also alleges that the program violates the Fifth Amendment, under which the government cannot take private property for public use without "just compensation."

The Inflation Reduction Act, signed into law by President Joe Biden last year, gave CMS the ability to negotiate prices for the highest cost drugs. CMS is expected to publish a list of the first 10 Medicare Part D drugs for which it will negotiate prices in September, and the new prices are slated to go into effect in 2026. Drugmakers developing or selling advanced precision oncology treatments, which tend to carry hefty price tags, are closely watching how CMS wields its new powers. 

Merck is expecting multiple drugs it has developed to be subject to the Drug Price Negotiation Program, including its checkpoint inhibitor Keytruda (pembrolizumab), which has a list price of $10,897.12 for each dose when given every three weeks or $21,794.24 when given every six weeks. Last year, Merck posted $20.94 billion in sales from Keytruda, up 22 percent from $17.19 billion in 2021. The blockbuster immunotherapy is set to lose exclusivity in the US in 2028.

In an emailed statement from an HHS spokesperson, Becerra said, "We’ll vigorously defend the President's drug price negotiation law, which is already lowering healthcare costs for seniors and people with disabilities. The law is on our side."