Details on Merck's lawsuit

Merck's lawsuit, filed Tuesday of last week, argued the drug pricing negotiation process outlined in the IRA is a "sham" and a bureaucratic diktat in disguise, backed by coercive state sanctions rather than mutual consent that is "tantamount to extortion."

Specifically, Merck claimed drug price negotiations will result in the government taking the company's "private property," violating the Fifth Amendment, which states the federal government must provide "just compensation" when it takes property.

"By design, the IRA does not provide just compensation, because it requires HHS to seize minimum discounts from market benchmark prices and grants the agency vast discretion to provide even less remuneration," the lawsuit says. "The entire purpose of the Act is to secure drugs like Merck's for Medicare beneficiaries at heavily discounted prices, so the Government — the ultimate payor — can save money."

Merck also argued the drug price negotiation will violate the company's First Amendment right by forcing Merck to say it "agreed" to negotiating a maximum price for prescription drugs mandated by the government and that the new price is "fair" when the company doesn't believe that to be the case. The agreement would forfeit Merck's ability to engage in counter-speech by preventing the public disclosure of how negotiations proceeded, the company argued.

"If a manufacturer refuses to participate in this 'negotiation' or declines to 'agree' to sell at the mandated price, it incurs a ruinous daily excise tax amounting to multiples of the drug's daily revenues," the lawsuit says. "And once the Government successfully coerces entry into such an 'agreement,' that manufacturer becomes legally compelled to sell its most valuable products for a fraction of their value, on pain of yet more draconian penalties."

Merck argued that Congress should have taken a clearer, constitutional path allowing drugmakers the option to decline adhering to maximum prices. However, Merck argued that by doing so, the federal government would be exposed to political backlash if certain drugs were unavailable through Medicare.

"So, instead, 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," the lawsuit says. "This is political Kabuki theater."

Details on the Chamber of Commerce's lawsuit

In a separate lawsuit filed Friday, the U.S. Chamber of Commerce argued the IRA consolidates "unfettered and unchecked power" to HHS.

"Government price controls harm patients, limit access to medicine, and stifle American innovation. Moreover, the new provisions in the [IRA] violate fundamental protections for free enterprise enshrined in our Constitution, which would have far-reaching implications in the future," the Chamber of Commerce said in a statement.

Similar to Merck's lawsuit, the Chamber of Commerce argued the negotiation process violates the First and Fifth Amendments, and said the penalties applied to companies refusing to comply with the negotiation process were excessive and violated the Eighth Amendment.

"When the government caps prices, it caps innovation and endangers access to better treatments — harming patients the most," the Chamber of Commerce said. "The new IRA provisions establish an artificial and arbitrary system for devising price caps that will jeopardize medical breakthroughs for individuals with life-threatening and chronic illnesses."

White House response

In a statement, HHS Secretary Xavier Becerra said the department plans to "vigorously defend" the drug negotiation plan.

"The law is on our side," Becerra said.

Meanwhile, White House press secretary Karine Jean-Pierre said in a statement that the Constitution does not prevent Medicare from negotiating lower drug prices and blamed large drug companies for profiteering.

"Any time profits of the pharmaceutical industry are challenged, they make claims about it hindering their ability to innovate," Jean-Pierre said. "Not only are these arguments untrue, but the American people do not buy them." (Bettelheim, Axios, 6/7; Wanneh, Inside Health Policy [subscription required], 6/6; Murphy, Associated Press, 6/6; Goldman, Axios, 6/6; Choi, The Hill, 6/9; Cohrs, STAT+ [subscription required], 6/10; Commins, HealthLeaders Media, 6/9)

The Biden administration has outlined how it will implement certain drug pricing provisions of the Inflation Reduction Act (IRA), including a new process for prescription drug pricing negotiations and manufacturer rebates for certain drugs covered by Medicare.