Merck & Co has filed a federal lawsuit against the Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS), challenging the constitutionality of the drug price negotiation process contained in the inflation reduction act of 2022 (IRA). The IRA permits Medicare to negotiate prices with drug companies and cap inflation on drug prices. Merck called the drug price negotiation process a “sham” and “extortion”. More legal actions are expected to be taken against the IRA, which impacts multiple sectors, including the energy industry, and additional lawsuits may potentially be heading to the Supreme Court of the United States.
The IRA aims to reduce the deficit, lower prescription drug prices, invest in domestic energy production while promoting clean energy, and limit inflation by reducing the prices of prescription drugs. The Congressional Budget Office predicts that the drug pricing provisions in the IRA will reduce the federal deficit by approximately $237 billion over ten years (2022-2031). The IRA amends the Medicare Part D’s noninterference clause by requiring the HHS secretary to negotiate prices with drug companies and set an upper limit on the negotiated price for certain single-source brand name drugs or biologics that are covered under Medicare Part D. The HHS is due to release the first ten drugs for negotiation in September 2023, and prices would take effect on January 1, 2026.
The IRA mandates that when the HHS secretary negotiates the “maximum fair price” for a specific drug, the secretary must consider several criteria, including the manufacturer’s research and development costs, current unit costs of production and distribution, patents and market data and revenue. Certain categories of drugs are excluded from the negotiation process. Medicare prescription drug prices are negotiated between pharmaceutical manufacturers and insurance companies that administer Part D plans.
Merck expects that the HHS will select its products, Januvia, Janumet, and Keytruda, as part of the first round of the program. Merck filed a federal lawsuit against the HHS and CMS, asserting two claims. The first claim alleges that the process of the IRA is for Medicare to obtain prescription drugs without paying fair market value, thus yielding the threat of crippling penalties to force manufacturers to transfer their patented pharmaceutical products to Medicare beneficiaries, for public use. The second claim is that the IRA engages in a façade of “negotiations” and “agreements” that require manufacturers to convey that they “agree” with the HHS’s “fair” process.
Additional lawsuits, including pharmacist groups, other interested parties, and pharmaceutical manufacturers, are expected to file lawsuits or submit papers in support of the Merck lawsuit and the anticipated appeals in the federal court system. These lawsuits carry significance as they may reach the U.S. Supreme Court before the new prices for the first round of ten drugs take effect starting on January 1, 2026. The IRA affects multiple sectors and participants of the pharmaceutical industry, and additional legal actions are expected.
This article is authored by Sheila Raftery Wiggins and Jonathan L. Swichar of the law firm Duane Morris LLP and was published on Mondaq, a leading provider of legal, regulatory, and financial information.
Original Story at www.mondaq.com – 2023-06-13 08:50:37
