The Strategist

Merck becomes first pharmaceutical company to sue U.S. over Inflation Reduction Act

06/07/2023 - 10:29

U.S. pharmaceutical company Merck filed a lawsuit against the U.S. Department of Health and numerous other governmental organizations in the U.S. District Court for the District of Columbia. According to the company, a provision in the United States' inflation-control law that permits the price of some medications to be negotiated under the country's national health insurance (Medicare) program is unconstitutional.

Ian Rainey
Ian Rainey
The Medicare program is required by law to bargain with pharmaceutical companies over the cost of some medications. The ten most expensive medications purchased under the program are the subject of the first round of such discussions, which are scheduled to take place in September. The new prices will become effective in 2026. The U.S. government can levy excise taxes on certain pharmaceuticals, amounting to 95% of their U.S. sales, if the corporations refuse to cut their pricing.

The administration of U.S. President Joe Biden anticipates that the new regulations will contribute to a $25 billion reduction in Medicare prescription spending by 2031. The cancer treatment Keytruda and the diabetic treatment Januvia from Merck are two medications that might be bargained in the upcoming years. Last year, they each made $1.2 billion and $12.7 billion in sales in the United States, respectively.

Merck claims in its complaint that the new regulations will compel pharmaceutical companies to mark their products down. The business believes that these regulations compel pharmaceutical firms to seem as though they are agreeing to decrease prices voluntarily in order to "participate in a political kabuki theater."