Merck sues over Medicare price negotiations

The drug company Merck filed a lawsuit Tuesday in a bid to block the Biden administration's plan to curb drug prices paid by the Medicare insurance program.

After years of battles over high prescription drug prices, the White House and Democrats in Congress approved a limited system of Medicare price negotiation for the first time last year as part of broader budget legislation.

Merck's lawsuit - which labels the government's negotiating rules a "sham" and a form of "extortion" - will move the battle into federal courts, setting up a test of government power to put caps on the amount it pays for vital prescription drugs.

Merck argued in a statement that reducing Medicare prices will discourage future investment in the development of new therapies, which has been the industry's argument against price controls for decades. It also argues the administration's move toward price curbs is an illegal taking of property.

"By coercing Merck to provide its drug products at government-set prices, the program takes property for public use without just compensation in violation of the Fifth Amendment," the company said in a statement Tuesday.

Merck said it expects some of its top-selling diabetes and cancer drugs to be early targets of the administration's pricing program.

It said Medicare's rules violates Merck's free speech rights by forcing drug companies to agree that prices were set through negotiation, even though Merck views the negotiation terms as a form of dictated price controls.

"That compelled mirroring of the government's political message violates the First Amendment," the company said. In the colorfully worded lawsuit, it labels the process "political Kabuki theater."

In framing its case in constitutional terms, it said it will appeal all the way to the Supreme Court if necessary. The Department of Health and Human Services, which administers Medicare, did not immediately respond to a request for comment.

The Biden administration trumpeted its success last year in winning a limited form of Medicare price negotiation in the Inflation Reduction Act. Soaring drug costs have been a focus of bipartisan ire on Capitol Hill for years. Passage of the act represented a rare loss for the drug industry and its army of lobbyists.

In March, the administration published a schedule that said the first negotiated prices will take effect in January of 2026.