Breaking: Merck reminds us that in America you can sue a ham sandwich if you like.
One of the most important provisions of the Inflation Reduction Act, passed with only Democratic votes in the U.S. House last summer, was this one: After decades of prior attempts, it finally allows the Centers for Medicare & Medicaid Services (CMS) to actively negotiate the price of at least some prescription drugs. As explained by the Kaiser Family Foundation:
The Inflation Reduction Act of 2022 (the Act), signed into law by President Biden in August 2022, includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. One of the Act’s key drug-related policies is a requirement for the Secretary of Health and Human Services (HHS) to negotiate prices with drug companies for certain drugs covered under Medicare Part D (starting in 2026) and Part B (starting in 2028). This new requirement is the culmination of years of debate among lawmakers over whether to grant the federal government the authority to negotiate drug prices in Medicare.
The Centers for Medicare & Medicaid Services (CMS) recently issued initial guidance describing CMS’s plans for implementation of the new Medicare Drug Price Negotiation Program for 2026, the first year that negotiated prices will be available under this new program. CMS will announce the list of 10 Part D drugs to be negotiated on September 1, 2023. Drawing on information in CMS’s initial guidance, these FAQs address several questions related to Medicare’s drug price negotiation program and how CMS intends to implement the new program, with a focus on the details that apply for 2026.
...Drugs qualify for price negotiation for 2026 if they are covered under Medicare Part D, Medicare’s outpatient prescription drug benefit program, and are single-source brand-name drugs or biological products without therapeutically-equivalent generic or biosimilar alternatives. In addition, a drug product must be at least 7 years (for small-molecule drugs) or 11 years (for biologics) past its FDA approval or licensure date, as of the date that the list of drugs selected for negotiation is published.
...This means that for a single-source drug to be eligible for negotiation for 2026, a drug product must have been approved on or before September 1, 2016, and a biological product must have been licensed on or before September 1, 2012. For drugs with multiple FDA approvals, CMS intends to use the earliest approval date to determine the number of years that have elapsed.
It goes into much more detail, but you get the idea.
As you might imagine, this provision of the IRA is perfectly reasonable and long overdue, so naturally the pharmaceutical industry isn't happy about it.
Merck Sues Over Law Empowering Medicare to Negotiate With Drugmakers
The company is heavily reliant on a cancer drug that could be targeted by a program intended to lower drug prices.
The story is behind a paywall so I don't have a lot of details available yet. Fortunately, University of Michigan Constitutional law professor Nicholas Bagley provided the goods via a Twitter thread (Twitter may mostly be a cesspool these days but it's still a great source of information for expertise, at least for now):
So Merck has sued the Biden administration over the drug negotiation provisions in the Inflation Reduction Act. What’s it arguing? And are those arguments any good? The complaint is here.
Merck has two main claims. First, it says that Congress is “taking” its property—the drugs that it has patented and that it manufactures—by refusing to pay sticker price. And, under the Fifth Amendment, the government can’t take private property without “just compensation.
Second, Merck says that the IRA violates the First Amendment when it forces Merck to “negotiate” over the prices of some of its drugs and then “agree” to a lower price. Merck says the negotiations are a sham and that you can’t force someone to say stuff they disagree with.
Now, there's surely a whole lot more to be said, and we're going to get a lot of briefing here. So take all this with a grain of salt. But both of these claims look very, very weak.
The key point is that Medicare and Medicaid are voluntary programs. They offer a deal to doctors and hospitals and, yes, pharmaceutical companies: If you abide by our rules, we’ll give you money.
Historically, that deal has been really attractive because Medicare and Medicaid have been barred from negotiating over drug prices. They’re also a HUGE market.
The IRA tries to insert some fiscal discipline into the program. If Merck doesn’t like that, fine. Merck can decline to participate. Because no one’s forcing Merck to sell its drugs at a cut-rate price, the government isn’t “taking” any of its property.
Merck doesn’t have a constitutional right to sell its drugs to the government at the price that it sets. That'd be nuts.
His thread goes on, but again, you get the idea.
As absurd as this case may be, the old saying still applies: You can sue a ham sandwich. That doesn't mean you're gonna win your case.
This does, however, underscore just how vitally important judicial appointments are. Passing all the legislation in the world or signing all the executive orders in the world won't accomplish much if its overturned or struck down by the courts, regardless of how idiotic the decision may seem to be.
After all, cases even more idiotic than this one have made it all the way to the U.S. Supreme Court in the past.