# Merck Sues Government Over Medicare Drug Price Negotiation Program
The pharmaceutical company Merck has filed a lawsuit against the government over a federal law that allows Medicare to negotiate drug prices directly with manufacturers. The law, which will go into effect in 2026, is part of the Inflation Reduction Act and was passed by Democrats as a way to lower drug prices. However, Merck claims that the law will stifle the ability of drug companies to make risky investments in new cures.
## The Details
– Merck has filed a lawsuit against the government over a federal law that allows Medicare to negotiate drug prices directly with manufacturers.
– The law will go into effect in 2026 and is part of the Inflation Reduction Act passed by Democrats.
– Merck claims that the law will stifle the ability of drug companies to make risky investments in new cures.
– Other drug companies have suggested that they will cut certain drug development programs because of the projected dent to their revenue.
– Merck is seeking a court order or another legal remedy that could exempt the company from having to participate in the negotiation program.
## Merck’s Arguments
Merck’s lawyers claim that the Medicare-negotiation program is unconstitutional. They say the program would coerce Merck to provide its products at government-set prices, violating a clause of the Fifth Amendment that prohibits the government from taking private property for public use without just compensation. They also claim that the program would violate Merck’s free-speech rights by coercing the company to sign an agreement it did not agree with upon the conclusion of the negotiation.
However, several experts who study the industry said the constitutionality arguments were weak and would face an uphill battle in court. “What Merck argues is ‘coercion’ is actually the establishment of a freer, more rational marketplace” that will address a crucial root cause of high drug prices, said Dr. Ameet Sarpatwari, an expert in pharmaceutical policy at Harvard Medical School.
## Potential Impact
The negotiation process gives drugmakers leeway to reject Medicare’s final offer and walk away without a deal if they are not happy, subject to a tax. However, Merck’s lawsuit said that for one of the company’s drugs, the tax for refusing an offer could amount to tens of millions of dollars on the first day and rise to hundreds of millions daily after a few months.
In September, the government plans to announce the first 10 drugs that will be subject to negotiation in 2026. A widely used Merck drug for diabetes, Januvia, is likely to be on that list. The program could also affect Merck’s long-term plans for its blockbuster cancer drug Keytruda. It could be among the first products targeted when negotiations begin in 2028 on drugs administered in a health care setting.
The current version of Keytruda, administered as an infusion, will face its first competition that same year, so its sales are expected to erode regardless of whether the program targets it. But Merck had been expecting to bring in significant revenue from a new formulation of Keytruda it is developing that can be more easily given under the skin. That could be subject to negotiation, too, under the government’s plans for the program.
Merck’s lawsuit against the government over the Medicare drug price negotiation program is the drug industry’s most significant move so far to fight back against a substantial change to health policy. While Merck argues that the law is unconstitutional, experts say that the arguments are weak and will face an uphill battle in court. The program could potentially affect Merck’s long-term plans for its blockbuster cancer drug Keytruda and other drugs.