In a strong move against the federal government, Merck & Co., based in Kenilworth, New Jersey, has launched a lawsuit against the Inflation Reduction Act (IRA). The firm has retained the services of prominent law firm Jones Day, at times known for its assertive litigation style. In recent years, the firm has also been involved in contentious cases, for instance, representing Volkswagen in its emissions scandal and Donald Trump during his presidential campaigns.
On June 16, Bristol Myers Squibb joined Merck in arguing that the IRA violates the First and Fifth Amendments of the U.S. Constitution in a lawsuit in federal district court in New Jersey.
In Merck’s opening salvo against the government’s prescription drug pricing program under the Inflation Reduction Act (IRA), the company has fired off a strongly-worded complaint. The suit was filed on June 6 in the U.S. District Court for the District of Columbia against senior federal healthcare officials and agencies including the Secretary of Health and Human Services Xavier Becerra, and the Centers for Medicare & Medicaid Services.
This legal challenge is the latest chapter in Merck’s tumultuous relationship with government regulatory bodies. Last year, the Senate Finance Committee chair accused Merck and Abbott of failing to comply with the Senate Finance Committee’s investigation into the tax practices of Big Pharma.
While Merck contends that the IRA violates its constitutional rights, critics argue otherwise. Energy and Commerce Committee Ranking Member Frank Pallone, Jr. (D-NJ) has labeled the lawsuit as “outrageous,” asserting that it’s crucial for Medicare to negotiate fair prescription drug prices. Pallone is confident the law will survive this lawsuit.
“We’ll vigorously defend the President’s drug price negotiation law, which is already lowering health care costs for seniors and people with disabilities,” said Secretary Xavier Becerra in a statement. “The law is on our side.”
A WSJ op-ed muses that the case may be headed to the Supreme Court.
Recently, we provided a timeline of events leading up to the constitutional challenge. In the backdrop of Merck’s lawsuit against IRA, the company has raised several concerns about the government’s prescription drug pricing program. Below, we break down some of Merck’s central arguments in its opening complaint, citing the relevant paragraphs where the claims are made:
Complaint calls IRA negotiations and agreements a ‘dystopian parody’
- Merck specifically targets the IRA’s mandated “negotiations” and “agreements,” asserting that they are a “sham.” Its complaint argues that the government does not offer “neither genuine ‘negotiations’ nor real ‘agreements.'” The lawsuit also describes this negotiation process as a “dystopian parody.” Additionally, the complaint describes the excise tax penalties as “ruinous” and “akin to extortion,” but stops short of extending this characterization to the entire drug pricing program under the IRA. (¶2–3, 30, 41, 71)
Claims related to Fifth Amendment rights
- Merck asserts that the IRA infringes upon its Fifth Amendment rights by appropriating its pharmaceutical products without paying “just compensation,” i.e., the fair market value of the drugs. It claims this amounts to an unconstitutional taking under the Fifth Amendment. (¶4, 57)
Complaint also alleges violation of First Amendment rights
- The complaint contends that the IRA also violates its First Amendment rights by compelling Merck to express a message it rejects. In particular, Merck argues that the IRA would force it to affirm the government’s view that the imposed prices are “fair” and are the result of genuine “agreements.” The IRA results in a “dystopian parody of ‘negotiation,’” it maintains. Additionally, it argues that its right to engage in counterspeech to dispute these notions is suppressed as a result of restrictions on the public disclosure of the negotiation process. (¶71, 100)
Excise tax penalties threaten ruinous fines for Merck
- The lawsuit argues that mandatory excise tax penalties for noncompliance with the IRA would result in “millions of dollars in penalties every day.” (¶31)
Complaint calls IRA scheme ‘Political kabuki theater’
- Merck’s complaint refers to the IRA’s scheme as “political Kabuki theater,” in which severe penalties are used to procure medicines without paying their fair value, while coercing manufacturers into pretending the exchange is “fair” and voluntary. (¶7)
IRA’s mandatory agreements: A ‘bureaucratic diktat’ in Merck’s eyes
- Merck critiques IRA’s mandatory “agreements” as “a bureaucratic diktat in disguise,” imposed through coercive state sanctions rather than mutual consent. (¶77)
Complaint views IRA as a “draconian” and deceptive scheme
- Finally, Merck argues that the IRA, which it describes as a “draconian and deceptive scheme,” provides no option to avoid its scheme of forced sales and compelled speech. It goes on to say that accepting Medicare/Medicaid reimbursements does not constitute manufacturers’ consent to this scheme, and it believes the IRA’s approach violates First Amendment rights. (¶78)
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