There's no such thing as a shyster lawyer. Ok, I was just kidding, they're all shysters, but mine is better than yours...so please take out your wallet.
Merck Sues to Stop the IRA’s ‘Extortion’
The drug maker makes a compelling case that the Medicare price-control bill violates the Constitution.
By The Editorial Board, WSJ
June 7, 2023 6:35 pm ET
If an assailant points a gun at your head and threatens to shoot if you don’t hand over your wallet, is that a negotiation? This describes the Inflation Reduction Act’s Medicare drug-price scheme, which Merck & Co. claims is “extortion” and unconstitutional in a compelling lawsuit filed Tuesday. Merck v. Becerra may be destined for the Supreme Court.
Congress last year gave the Health and Human Services Department carte blanche authority to fix Medicare drug prices under the guise of a negotiation. But as Merck argues in its lawsuit, the program “involves neither genuine ‘negotiations’ nor real ‘agreements,’” and is all “political Kabuki theater.”
HHS forces companies to provide drugs to the government at its dictated prices. The agency selects drugs to negotiate and then compels manufacturers to sign an “agreement” promising to sell their products at whatever “fair” price Medicare decides. The agency could demand Merck sell its drugs at a 90% loss, and the drug maker couldn’t refuse.
The government essentially makes drug makers an offer they can’t refuse. Manufacturers that don’t participate in the negotiations or reject the government’s prices incur a crippling daily excise tax that starts at 186% and eventually climbs to 1,900% of the drug’s daily revenues. Companies can’t walk away from the table as they would in a real negotiation.
SubscribedMerck would have to pay hundreds of millions of dollars a day in penalties on a single drug after a few months of resisting the government’s demands. Non-compliance would be so ruinous that Congress projected the excise tax would raise no revenue. The excise tax isn’t a real tax. It’s a sword hanging over drug makers to guarantee compliance.
Even in Europe, drug makers can refuse to sell products to national health systems if the price is too low. But as Merck explains, Democrats in Congress wanted “to allow the Government to pretend, as it already has done, that HHS’s prices are not top-down mandates but the product of voluntary ‘agreements’ with companies who concede they are ‘fair.’”
Congress also wanted to avoid an “enormous political backlash if certain medications became unavailable through Medicare,” as Merck puts it. “The Act’s structure is instead driven entirely by perception and avoiding accountability.”
Merck says the Medicare price controls are an unjust taking of property under the Fifth Amendment and violate its speech rights. The government confiscates patented products by requiring drug makers to provide them at steep discounts that are far below their market value or what it costs to develop and produce them.
The lawsuit cites the Supreme Court’s Horne (2015) decision, which held that a Department of Agriculture program requiring raisin farmers to turn over a portion of their crop to the government was a per se taking. So is the IRA’s regime, which similarly compels manufacturers to surrender their drugs without just compensation.
Adding constitutional insult to injury, the IRA launders “its mandates through performative ‘negotiations’ and ‘agreements’” that require “manufacturers to endorse and express the view that they ‘agree’ to HHS-dictated forced prices, and that those prices are ‘fair,’” the lawsuit explains.
“But while the Government can mislead about its machinations, it cannot force those it governs to do the same. Our Constitution does not countenance compelled speech in service of state propaganda,” Merck argues. Touché. The government is also restricting Merck’s speech by prohibiting drug makers from informing the public about what goes on in the sham negotiations.
The Centers for Medicare and Medicaid Services this year barred manufacturers from disclosing “to the public any information in the initial offer or any subsequent offer by CMS, the ceiling price contained in any offer [or] . . . any information exchanged verbally during the negotiation period.” The government has no compelling justification for this gag order.
***
The legal implications of this case extend beyond the pharmaceutical market. If Congress can leverage the threat of ruinous penalties to reduce Medicare drug prices, what’s to stop it from doing the same for healthcare provider payments or defense equipment that politicians believe are too costly? At this Hotel California, businesses don’t even get a choice of whether to check in or leave.
Advertisement - Scroll to Continue