Big Pharma is ‘reeling’ over the Inflation Reduction Act. Now Merck is fighting back

The pharmaceutical industry suffered a huge legislative defeat last year when Congress and President Joe Biden enacted a law aimed in part at lowering prescription drug costs for Medicare beneficiaries.

Now at least one drugmaker is fighting back in the courts and on Capitol Hill.


Merck &Co. filed a lawsuit in June alleging the Inflation Reduction Act’s drug price negotiation program for Medicare amounts to extortion and violates the U.S. Constitution.

The drugmaker is stepping up its advocacy in Washington, too. It spent $8.2 million on federal lobbying through September — the most it has spent in the first three quarters since 2012, according to data compiled by OpenSecrets, a nonpartisan watchdog that tracks money in politics.

That doesn’t include membership dues to the Pharmaceutical Research and Manufacturers of America, a trade group that has spent more than $25 million annually on federal lobbying each year since 2017, according to OpenSecrets. Merck paid $14.4 million in dues last year, records show.

The Biden administration in August announced that Merck’s drug Januvia, which treats type 2 diabetes, will be among the first medications subject to Medicare-negotiated prices starting in 2026. Merck has said it anticipates more of its drugs — including its top-seller Keytruda, a cancer treatment — will soon be targeted, too.

The company likely stands to lose millions of dollars in Medicare payments. The industry also worries that private insurers may use Medicare’s publicly available prices as leverage to negotiate better prices.

The law’s supporters say it’s a much-needed first step toward reining in what they call government-enabled drug monopolies.

“At a high level, Merck and other drug corporations are reeling after facing their biggest policy loss, maybe ever, at least in the last 20 years or so,” said Steven Knievel, a health policy researcher and advocate at Washington, D.C.-based Public Citizen, a pro-consumer nonprofit.

Merck says its ability to develop breakthrough cures and treatments requires investments of billions of dollars in multiple projects, knowing that only a fraction will succeed and win regulatory approval while the company fails to recoup its investment on the rest.

“It is therefore vital for Merck to be able to charge market prices for that tiny subset of drugs that not only succeed but achieve groundbreaking results,” Patrick T. Davish, associate vice president of global market access at Merck, said in a court filing. Because the law specifically targets those drugs, he said, “it will substantially hinder Merck and its peers as they undertake the expensive and arduous work of innovation.”

In a statement, Merck said “the industry and patients are already seeing the harmful effects” of the Inflation Reduction Act.

The fight comes as Biden is putting his push to lower drug prices at the center of his 2024 reelection campaign.

The problem: High drug costs

Prescription drug prices are much higher in the U.S. than in other democracies.

Because of the cost, some 2 million adults 65 and older did not get needed prescriptions in 2019 — a problem that was more acute among people with chronic diseases like diabetes, according to research by the U.S. Department of Health and Human Services.

The growing availability of generic drugs has generally helped slow growth in Medicare’s prescription drug costs per enrollee, according to the nonpartisan Congressional Budget Office. But CBO found that from 2009 to 2018, the average net price of a prescription for a brand-name drug — minus any rebates — more than doubled, to $353, in Medicare Part D, the program’s pharmaceutical benefit.

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