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A world drug manufacturer Merck on Tuesday sued the Biden administration over latest Medicare powers to significantly lower drug prices for seniors under the Inflation Reduction Act, opening a salvo within the pharmaceutical industry’s efforts to undermine this system.
In a scathing grievance filed in federal court in Washington, Merck criticized the negotiation process as “pretend” and “amount to extortion.”
The drugmaker accused the federal government of implementing what the corporate described as an unconstitutional plan to seize private property for public use without just compensation, in violation of the Fifth Amendment.
The Inflation Reduction Act, which went into effect last summer, was a significant victory for President Joe Biden and Democrats in Congress who had long pushed for Medicare to fight rising drug prices.
The pharmaceutical industry fiercely opposed the law, arguing that it could stifle the event of latest drugs.
Merck said the Department of Health and Human Services is forcing firms right into a deal that effectively dictates the value of the drug at a reduction of 25% to 60% under the specter of a day by day excise tax that’s several times higher than the drug’s day by day revenue.
Merck asked a judge to bar HHS from forcing the drugmaker to take part in this system.
“Under the IRA, the federal government will requisition Merck’s patented pharmaceutical products and distribute them to Medicare beneficiaries through a forced sale,” the corporate’s legal team wrote within the grievance.
“These forced sales – enforced by the specter of draconian fines which the federal government has admitted no manufacturer could reasonably afford to pay – will deprive Merck of possession and title to non-public property,” Merck’s lawyers wrote.
Merck also argued in its lawsuit that Medicare’s latest price-negotiation powers violated the corporate’s First Amendment rights to free speech. The drugmaker claimed the Inflation Reduction Act was forcing firms to take part in a “political hoax” that portrayed this system as fair price negotiations.
“Calling firms to legitimize government extortion is a type of parroted orthodoxy that’s prohibited by the First Amendment’s doctrine of coerced speech,” Merck’s lawyers wrote.
The American Pensioners Association in a press release to CNBC said Medicare negotiations would save billions of dollars for seniors, lots of whom cannot afford pharmaceuticals.
Bill Sweeney, AARP’s chief lobbyist, accused the pharmaceutical industry of struggling to “fulfill its profits” while Americans face the best drug prices on the earth.
“Seniors and taxpayers are bored with being a piggy bank for the profits of massive pharmaceutical firms,” Sweeney said. “Lawsuits like this are simply an try and keep profits high by robbing America’s seniors.”
Under the Inflation Reduction Act, HHS will select 10 drugs to be drawn into the primary round of pricing negotiations. These drugs can be people who Medicare Part D spends essentially the most money on and that haven’t any overall competition.
Medicare Part D is a program that covers the fee of medication that seniors normally buy from pharmacies.
Medicare and Medicaid service centers will publish the list of medication chosen for the primary cycle of negotiations on September 1. Corporations producing these drugs have an October deadline to sign contracts to take part in these negotiations.
Merck said its type 2 diabetes drug Januvia can be the topic of a negotiating deal later this yr. In line with financial records, the drugmaker posted $2.8 billion in revenue from the drug last yr.
Merck also anticipates that its blockbuster cancer immunotherapy Keytruda and its other diabetes drug Janumet can be included in this system in subsequent negotiation cycles. The drugmaker booked $21 billion in sales from Keytruda in 2022 and $1.7 billion in sales from Janumet.
Keytruda accounted for 35% of Merck’s total revenue last yr.
CMS will submit its initial price offer for the primary round of price negotiations on February 1, 2024, based on the schedule published by HHS. In line with the department, drugmakers have 30 days to just accept the value or make a counteroffer.
Negotiations will end on August 1, 2024, and CMS will publish the list of reduced prices in September, as scheduled. In line with HHS, these prices will go into effect on January 1, 2026.
In subsequent years, this system can be expanded to incorporate Medicare Part B, which generally covers medications and coverings that seniors cannot self-administer at home.
CNBC contacted HHS and the White House for comment.