Merck sues to stop Biden's drug-negotiation program

Drugmaker Merck & Co. filed a lawsuit Tuesday alleging President Biden's marquee effort to negotiate down the cost of drugs under Medicare is "tantamount to extortion" and violates the Constitution.

The drugmaker filed a suit against Health and Human Services Secretary Xavier Becerra in a federal court for the District of Columbia. Merck wants the court to block the Biden administration from enforcing the program, saying at least one of its drugs will be selected for the program and expose the company to crushing fines if it rejects the government's price.

Drug-price negotiation was a key element in the Inflation Reduction Act that Democrats muscled to passage last year. For years, Mr. Biden's party sought to use the force of government to slash drug prices under Medicare, saying it will save taxpayers and consumers billions, though the pharmaceutical industry and free-market conservatives say it is socialist price-setting.

In its complaint, Merck says the negotiation program is a sham.

"It involves neither genuine 'negotiations' nor real 'agreements.' Rather, once HHS 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," the complaint says. "This is not 'negotiation.' It is tantamount to extortion."

The lawsuit says the program violates Fifth Amendment protections against the government seizure of property without just compensation. It also alleges First Amendment compelled-speech doctrines by forcing drug companies to smile and pretend they took part in a voluntary process.

"This is political kabuki theater," the complaint says.

Under the Biden negotiation program, HHS will select 10 high-cost, single-source drugs from Medicare's Part D prescription benefit program this year and apply the negotiated prices by 2026. More drugs from Medicare Part D and the doctor-administered Part B program will be selected in subsequent years.

The White House, which rarely comments on pending litigation, vowed Tuesday to fight the lawsuit.

"President Biden took on Big Pharma in the legislative process and he won," White House press secretary Karine Jean-Pierre said. "Now, Big Pharma is challenging this historic action in court. The Biden-Harris administration is going to fight attempts to go back to the way things were before. And so, we are confident we will succeed."

Ms. Jean-Pierre said the drugmaker's constitutional claims are without merit.

Merck, which is based in Rahway, New Jersey, said it expects HHS to select Januvia, a treatment for type 2 diabetes, for negotiation later this year.

"There is an actual controversy between the parties. One of Merck's drugs, Januvia, is among the ten most widely reimbursed drugs within Medicare Part D, which means it will be subject to the program starting in September 2023," the lawsuit says.

Other Merck products, including a diabetes drug, Janumet, and a cancer drug, Keytruda, could be subjected to the program in future cycles.

The lawsuit is likely to draw opposition from advocates who fought for decades to see the type of price-setting that other countries enjoy.

However, conservative thinkers are siding with Merck, saying the program does not reflect anyone's definition of negotiation.

"The Biden administration's Inflation Reduction Act doesn't provide for drug price negotiation as advertised," said Joe Grogan, a nonresident senior fellow at the University of Southern California Schaeffer Center who led the Domestic Policy Council under former President Donald Trump. "Instead, it creates a price-fixing regime a Soviet bureaucrat would be proud of. This slow-rolling government takeover of the pharmaceutical industry will strangle innovation, denying essential medicines to patients desperate for newer, more effective treatments."