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Merck is suing the federal government over a plan to negotiate Medicare drug prices, calling the program a sham equivalent to extortion.
The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
Of all the measures in the year-old Inflation Reduction Act, finally empowering Medicare to negotiate the price of prescription drugs was the most popular, enjoying support from 71 percent of respondents before the bill was signed, including 68 percent of Republicans. Despite only affecting ten drugs in the first year and not impacting prices until 2026, the negotiations are estimated to save the federal government almost $100 billion by 2031, and cut prices that Medicare pays for certain drugs by half—which is expected to translate to particularly significant savings for marginalized communities.
The Centers for Medicare & Medicaid Services is expected to release the first ten drugs eligible for negotiations today. Meanwhile, Big Pharma is fighting tooth and nail to preserve its practice of charging prohibitive prices for lifesaving drugs by trying to get price negotiations struck down in court. With the help of some former Trump administration officials, BigLaw firms, and a judge with financial conflicts, there’s a worrying possibility the IRA’s most popular provision could be eliminated. And although drug price negotiations were a signature achievement of the Biden administration’s landmark legislation, the White House’s response has been underwhelming.
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The Medicare Modernization Act of 2003 explicitly forbade Medicare from negotiating directly with pharmaceutical manufacturers, a concession to Big Pharma made in exchange for the establishment of Medicare Part D drug benefits. While private Part D plans have been able to negotiate individually with manufacturers or through pharmacy benefit managers, they never had the clout needed to bring true savings to consumers. This ends with the IRA, which requires the federal government to negotiate prices for specific drugs under Medicare Parts B and D.
In the past few months, however, six pharma companies—Merck, Bristol Myers, Astellas, Johnson & Johnson, Boehringer Ingelheim, and AstraZeneca—and two coalitions of industry groups have filed eight separate lawsuits attempting to preemptively disallow Medicare from negotiating drug prices. Though the actual drugs that will be part of negotiations haven’t even been released yet, the companies and groups began suing in June on the presumption that their or their members’ patented drugs will be included.
Who is helping Big Pharma in the courts? In Merck and Bristol Myers’s respective cases, it’s the conservative law firm Jones Day, which famously represented both Trump campaigns, supplied many Trump administration officials, and had a hand in Trump’s Supreme Court nominations. On the case for both companies is Yaakov Roth, who successfully argued for the gutting of the administrative state in West Virginia v. EPA.
Bristol Myers has additionally retained the law services of Noel Francisco, the solicitor general under Trump who defended the Muslim ban at the Supreme Court, and Brett Shumate, a former deputy assistant attorney general under Trump. During his time at the DOJ, Shumate signed off on a settlement that included a $3 million payout from the government for legal costs that Jones Day incurred while it helped religious organizations successfully argue against the Obama-era requirement for employer insurance plans to cover contraception.
Most legal scholars who have weighed in on the matter contend that Big Pharma’s arguments are unsound.
Both Merck and Bristol Myers count among their counsel two clerks who worked for Supreme Court Justice Neil Gorsuch during the 2021-2022 term (John Henry Thompson and Louis Capozzi III), and Megan Lacy Owen, who clerked for Justice Kavanaugh during the 2018-2019 term. These figures, so fresh out of public service, are using the experience and credibility gained during their time in government to defend the interests of Big Pharma.
The lawsuits trot out a range of arguments, often employing hilariously indignant language (Merck refers to negotiations as “political kabuki theater” and “tantamount to extortion” in its initial complaint). But there are a few threads of argument as to how mandatory negotiations could be considered unconstitutional. The most prevalent alleges that the language in the bill essentially authorizes the unjust taking of property, which the industry says violates the takings clause of the Fifth Amendment. Another is that the legislation forces drug companies to say that the price resulting from negotiations is “fair,” which would violate their First Amendment rights by making them engage in speech they disagree with. Other arguments center around the Fifth Amendment’s due process clause and the Eighth Amendment’s excessive fines clause.
The substance of the arguments is barely even worth discussing—as some have noted, the negotiating process set out in the IRA is extremely weak compared with those of peer nations. As the Justice Department argued in the Chamber of Commerce’s case, these lawsuits are “little more than a dispute with the policy choices made by Congress, masquerading as constitutional theory.” Suing is just the thing you do after lobbying fails.
Most legal scholars who have weighed in on the matter contend that Big Pharma’s arguments are unsound. But at the same time, many are quick to point out that long-standing legal precedent is no obstacle for this billionaire-friendly Supreme Court, and it seems that given its choice of representation, Big Pharma is prepared for the cases to get that far.
They may already have gotten the luck of the draw in the first round. Judge Thomas M. Rose, a George W. Bush–appointed senior judge for the Southern District of Ohio, has been assigned to the Chamber of Commerce’s case, so far the fastest-moving of the eight. In July, the Chamber filed a motion for a preliminary injunction, which, if granted, would prevent the government from even beginning the negotiations process until all legal challenges are resolved. One problem: Judge Rose’s 2022 financial disclosures show that he owns significant amounts of stock in Johnson & Johnson, Moderna, and AstraZeneca. Any judge with significant interests in the pharmaceutical industry should stay far away from cases that affect the core interests of drug companies, but Rose’s positions in Johnson & Johnson and AstraZeneca are of particular concern given that the companies have filed their own lawsuits over the law that Rose is set to adjudicate.
The Department of Justice has filed a motion to dismiss the Chamber of Commerce’s case, arguing that the Chamber lacked standing. But beyond that, we’ve heard very little from the administration, or any of its top health officials, regarding these lawsuits. Some of the drugs hypothesized to be up for negotiation, such as Xtandi, were developed using public funding, and government action to make them more accessible for Americans whose taxpayer dollars funded their development has been a long time coming.
President Biden himself said it: “For years, Big Pharma won. Big Pharma blocked us. But not this time.” But the administration has been eerily quiet in publicly defending one of its greatest and most popular first-term achievements. For example, Chiquita Brooks-LaSure, the administrator of the Centers for Medicare & Medicaid Services, has been willing to note that “drug companies negotiate around the world,” but CMS declined to comment on this litigation specifically.
As long as pharma companies keep parading around their legal efforts to stop negotiations without rebuttal, they get to craft the narrative of the legacy of the IRA’s prescription drug program. It’s imperative that the administration not only defend the prescription drug negotiation program, but also make Republicans own any decisions by their judicial appointees to affirm Big Pharma’s bogus lawsuits. At the least, the administration shouldn’t be polite, or treat these challenges as legitimate legal questions. If only corrupt judges are willing to take these lawsuits seriously, the administration should be willing to declare it like it is.
This legislative victory has been decades in the making, and Big Pharma has had its chance to flex its power on stifling prescription drug price relief for Americans. Now, it’s time for the Biden administration to flex its own power, ensure that Big Pharma doesn’t sabotage the health care legacy of the Inflation Reduction Act, and finally work to deliver that relief.
