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OPINION

Merck Fighting for Rights, Market-based Health Care

a gloved hand holding a pill in fronto of a merck logo
(Dreamstime)

Sally Pipes By Monday, 19 June 2023 01:06 PM EDT Current | Bio | Archive

Pharmaceutical giant Merck announced last week that it is taking the federal government to court over the Inflation Reduction Act's drug pricing reforms. The lawsuit alleges that the law's Medicare price negotiation program violates some of the most fundamental rights guaranteed by the U.S. Constitution.

"This is not 'negotiation,'" the company says in its official complaint. "It is tantamount to extortion."

Such strong language is justified. The IRA's price controls represent an unprecedented act of government intervention into the prescription drug market — one that is certain to derail an innovative sector of our economy and deprive present and future patients of medical breakthroughs.

The IRA empowers the federal government to negotiate with drug companies over the price Medicare pays for certain drugs. But that word — "negotiate" — is a euphemism for something far more authoritarian.

"Negotiation" implies that drug companies can walk away if they are unhappy with the government's pricing demands. Yet under the IRA, the Secretary of Health and Human Services can name whatever price he or she sees fit for a wide range of medicines. Drug companies can submit a counteroffer. But the government is under no obligation to accept it.

The feds retain the final word on what the "maximum fair price" will be. And if a drug company doesn't want to sell its drug to the government at that price, it will face an excise tax of up to 95% of that drug's total sales.

In other words, if the government can't have the drug at the price it wants, then it's going to make sure no one else can — by seizing effectively all the revenue the drug brings in. The prospective penalty more or less forces drug companies to sell to Medicare on whatever terms the government dictates.

This arrangement, Merck argues, amounts to an unconstitutional government taking. As the firm points out in its filing, the Fifth Amendment "requires the Government to pay 'just compensation' if it takes 'property' for public use. Yet the singular purpose of this scheme is for Medicare to obtain prescription drugs without paying fair market value.

By definition — and by design — that is not 'just compensation.'"

Merck also claims that, by forcing drug companies to affirm that the government-dictated prices are "fair" and the product of "negotiations" and voluntary "agreements," the policy also violates basic First Amendment rights to free speech.

As Merck argues, "Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids."

Companies that refuse to go along with the government's narrative of "fair prices" and consensual "agreements" can face financial penalties on the order of a million dollars a day. If that's not "compelled speech," it's hard to know what is.

How the judiciary will react to Merck's arguments is unknown. But if the IRA's facade of "negotiating" drug prices is allowed to stand, then the ecosystem that produces innovative drugs may fall apart.

Developing new medicines is a risky enterprise, one in which failures are far more common than successes. Without the freedom to charge market prices for new medicines, drug companies will scale back research investments, particularly in spaces where there's high need. After all, a drug with a huge potential market is also one that the government will be more likely to target for price controls.

Merck isn't just fighting for its basic rights as a matter of principle. The firm is trying to protect the market-based system that has fueled medical discovery for generations. In so doing, it is standing up for a future which rewards and encourages the creators of life-saving treatments — instead of extorting them.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.

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SallyPipes
Merck ... is trying to protect the market-based system that has fueled medical discovery for generations. In so doing, it is standing up for a future which rewards and encourages the creators of life-saving treatments -- instead of extorting them.
merck, heath care
656
2023-06-19
Monday, 19 June 2023 01:06 PM
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