Merck and the US Chamber of Commerce Fight Medicare Drug Price Negotiations in Court

Big pharma is trying to derail the federal program allowing Medicare to negotiate the prices of some prescription drugs, which is expected to save the federal government $25 billion a year by 2031.

Lobbying did not work for Big Pharma, and that does not happen often

The drug manufacturers were trying, using a multimillion dollar lobbying campaign, to destructure the Democrats’ efforts to allow Medicare to negotiate drug prices for the first time. Big Pharma has used any tools available to turn the tables in its favor. In spring, they have been turning to the major social sites to drum up buzz for their prescription medications, essentially paying so-called ‘patient influencers’ to promote their products under the camouflage of genuine reviews. In another move, Big Pharma had its eyes locked on tax breaks, and subsidies that could be introduced following an executive order President Joe Biden signed last year to spur manufacturing innovation in the country.

But last summer, pharma lost, after spending more than $22.4 million lobbying on drug pricing and other issues in the first nine months of 2021 alone, according to some media disclosures, and that almost never happens in Washington.

What are the provisions of the 2022 reconciliation act concerning drug related policies

The 2022 reconciliation act includes several provisions that affect prescription drug prices and coverage under Medicare. The Congressional Budget Office estimated that those provisions would reduce the federal budget deficit by $237 billion from 2022 to 2031. There are three key drug-related policies that, together, are responsible for $129 billion of that reduction. 

To explain how the agency reached its estimate, we should focus on the effects of the three key policies in 2031:

• First, the act requires the Secretary of Health and Human Services to negotiate prices for certain drugs covered under Medicare Part B and Part D. CBO estimated that price negotiation will lower average drug prices in Medicare and will reduce the budget deficit by $25 billion in 2031.
• Second, certain manufacturers of brand-name drugs must pay rebates if their prices exceed an inflation-adjusted benchmark. CBO estimated that the inflation rebate policy will reduce the deficit by $8 billion in 2031.
• Third, the law redesigns the Part D benefit. CBO projected that changes in the Part D benefit will increase the deficit by $2 billion in 2031.

Merck – is trying to win the battle in court

Medicare hasn’t begun negotiating the price of prescription drugs, with the federal health program slated to announce by Sept. 1 which 10 high-cost drugs will be the first ones subject to negotiation. The new maximum price of the medicines will take effect in 2026.

The drug industry has made veiled threats of filing lawsuits over the new law since it was passed in August. 

After losing the lobbying war, at least one company – Merck – is trying to win the battle in court, which is casting an uncertainty veil over President’s Biden Inflation Reduction Act, which was supposed to lower drug prices for millions of senior patients. 

The drug manufacturer says lowering drug prices impedes their development of new treatments, and plans to take the lawsuit all the way to the Supreme Court, if need be, although some legal analysts do not expect it to succeed.  

The case might be “pretty weak”, as Ameet Sarpatwari, an assistant professor of medicine at Harvard Medical School, had said, but filing it is a sound strategic move for Merck. “If they can buy themselves some more time with their drug on the market at its monopoly-like price, that may make everything worthwhile” for the company, he said. 

Nicholas Bagley, professor at the University of Michigan Law School tweeted: “Now, there’s surely a whole lot more to be said, and we’re going to get a lot of briefing here. So take all this with a grain of salt. But both of these claims look very, very weak.”

The Biden administration has vowed to fight the lawsuit

Merck based its claims on two constitutional amendments. Basically, what the company says is that the new policy forces them to agree to the price HHS sets, thus violating its free speech rights. The other amendament Merck also alleges the program violates is the Fifth, which requires the government to pay “just compensation” when taking private property, in this case the supposedly acquirable profits from the sale of its drugs. Merck nominates three drugs, Januvia, used in the treatment of Type 2 diabetes, Janumet, another diabetes drug and Keytruda, a cancer therapy, as expected to be included in the negotiation. According to the Washington Post, the two diabetes drugs earned $4.5 billion in combined sales last year, and Keytruda had sales of nearly $21 billion.

The Biden administration has vowed to fight the lawsuit. “We are confident we will succeed,” White House press secretary Karine Jean-Pierre said. “Anytime profits of the pharmaceutical industry are challenged, they make claims about it hindering their ability to innovate. Not only are these arguments untrue, but the American people do not buy them.”

The Chamber of Commerce followed Merck with a lawsuit of their own

Other similar lawsuits might be on their way, and how the Biden administration is going to cope is a big question. In a statement, Nicole Longo, a spokesperson for the Pharmaceutical Research and Manufacturers of America, said the trade group will “continue to consider every tool available to protect patients and future innovation, which includes potential litigation.”

Only a few days after Merck, Friday, June 9th, the U.S. Chamber of Commerce filed a lawsuit in federal court against the Department of Health and Human Services and Centers for Medicare & Medicaid Services, challenging the constitutionality of the Inflation Reduction Act’s drug price negotiation program. The business group’s filing comes just three days after a similar lawsuit filed by Merck.

The Chamber of Commerce filing in U.S. District Court in Dayton, Ohio, argues that the IRA violates the Constitution’s “requirements of limited government, property rights, the rule of law, and the separation of powers,” giving the executive branch too much control over drug pricing. The lawsuit also claims that the law would harm innovation and reduce access to drugs for patients.