[Photocreo Bednarek/Adobe Stock]
Marking the first legal challenge of its kind, pharma giant Merck & Co. took to the courts on Tuesday, directly contesting the U.S. government over the Medicare drug price negotiation program. The Big Pharma company’s lawsuit, filed in the U.S. District Court for the District of Columbia, contends the program’s basis — the Inflation Reduction Act (IRA) — infringes upon the Fifth and First Amendments of the U.S. Constitution.
The legislation has put pricing pressure on the industry and contributed to a wave of recent M&A deals.
Merck, and the wider pharmaceutical industry, are raising the alarm. They claim the law, in effect, coerces drugmakers into accepting below-market rates. The lobbying group PhRMA (Merck is a member) released a statement in April 2023 arguing that the Inflation Reduction Act threatens patient access and complicates R&D efforts. In addition, PhRMA accused CMS of not complying with legal requirements by providing only 30 days for commenting on the complex pricing program.
Merck’s litigation follows the Biden administration’s drug pricing reform, poised to shave some $25 billion annually off Medicare’s drug costs by 2031. Prescription medicine costs in the U.S. are the highest globally. For its part, Merck is framing the negotiation talks as ‘coercive,’ even amounting to ‘extortion.’ Merck also argues the negotiations violate their First Amendment rights, curtailing their free speech.
Below, we offer the timeline below to capture the events leading up to the lawsuit:
Timeline
Merck sues the U.S. government
Merck & Co. announced a lawsuit against the U.S. government to stop the Medicare drug price negotiation program within the Inflation Reduction Act. The pharmaceutical company argued that this program violated the Fifth and First Amendments of the U.S. Constitution. This marked the first attempt by a pharmaceutical company to..
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Biden announces National Cancer Plan
Despite attempting to curtail the rate of drug spending, Biden has aimed to boost innovation in the pharma sector through his National Cancer Plan. The initiative would increase funding for certain oncology programs.
Government releases its roadmap for price negotiations
Following the passing of the Inflation Reduction Act, the government outlined its strategy for negotiating drug prices with manufacturers. This roadmap represented a concrete step toward implementing the drug pricing reform, which would go into effect in 2026.
The Inflation Reduction Act is passed
This legislation gave the U.S. government the power to negotiate Medicare drug prices directly with pharmaceutical companies. It was hailed as a significant move to curb skyrocketing healthcare costs, though it drew criticism from various stakeholders within the pharmaceutical industry.
Biden announces Prescription Drug Pricing Plan
President Biden, as part of the Build Back Better Framework, introduced a plan to address the rising costs of prescription drugs in the U.S. This plan opened a path to allowing Medicare to negotiate drug prices, an action that the pharmaceutical industry has resisted.
CMS moves to rescind the Most Favored Nation Model interim final rule
CMS proposed a rule to rescind the Most Favored Nation Model Interim Final Rule, signaling a reversal of the Trump administration’s policy
The American Rescue Plan Act signed into law
President Biden signed the American Rescue Plan Act into law on March 11, 2021. The President enacted the monumental $1.9 trillion economic stimulus bill in response to the COVID-19 pandemic and its economic impact.