Biden administration pushes back on Merck's drug price negotiation challenge

The Biden administration in a recent court filing forcefully pushed back on claims that the Medicare drug negotiation process is unconstitutional. 

Medicare's ability to negotiate drug prices has plenty of legal precedent and manufacturers are not being forced to participate, the Biden administration said this week in response to a lawsuit from drugmaker Merck.

According to the Department of Justice (DOJ), Merck's misunderstandings of the Inflation Reduction Act (IRA) and how the drug price statute will be implemented "doom its legal challenge on the merits."

The administration is facing a wave of challenges from interest groups and drug companies over provisions in the IRA that will allow Medicare to start negotiating prices for certain drugs.

The DOJ's filing in response to Merck echoes arguments the administration made in response to a lawsuit filed by the U.S. Chamber of Commerce and offers a preview of how it will likely respond to the others.

Merck was the first drug company to file suit, calling the statute a violation of the Fifth Amendment, which requires the government to compensate appropriately when it takes property.

Merck's diabetes drug Januvia was one of the first 10 drugs chosen for Medicare price negotiation. If manufacturers agree to the process, negotiations will take place in 2023 and 2024. Drugmakers have until Oct. 1 to sign agreements.

In its filing, the administration argued the program is voluntary and won't result in any property being taken even if Merck chooses to participate.

"While Merck may be dissatisfied with the conditions the Negotiation Program imposes on future Medicare spending, precedent confirms that imposing such conditions is part of Congress’s prerogative," DOJ wrote. 

"Attaching such conditions to a voluntary program neither compels Merck to surrender its property in violation of the Fifth Amendment nor requires it to engage in speech in violation of the First," the department added.

In addition, the DOJ argued that courts have "uniformly rejected" claims like Merck's for decades. 

"Whether confronting regulations limiting physician fees, nursing-home payments, or hospital reimbursements, courts have been unequivocal: entities are not required to serve Medicare beneficiaries, and thus the government deprives them of no property interest for purposes of the Fifth Amendment when it imposes caps on the amount the government will reimburse," the DOJ wrote.

Further, the administration said Merck's argument that the government is physically taking property would mean that the manufacturer has a constitutional right to dictate the government’s expenditures.

"By the same logic, physicians and hospitals could also challenge their reimbursement rates as takings," DOJ wrote. "Just as a defense contractor could not build an aircraft carrier and force an unwilling Pentagon to buy it (at any price), so too manufacturers cannot force their drugs onto the government at rates the government is unwilling to pay." 

If everything goes according to plan, lowered prices for the first 10 medications will go into effect beginning in 2026. 

But the Chamber of Commerce lawsuit could put the process on hold, because the group is asking for a preliminary injunction by Oct. 1 to block the negotiations from going into effect.

A federal judge in the Southern District of Ohio will hear oral arguments Friday.