Merck & Co. was the first drugmaker to sue over the controversial Medicare price negotiation provisions in last year’s Inflation Reduction Act (IRA). But the New Jersey drug giant “lacks standing” to challenge the law in court, the Biden administration argued in a new filing.
Monday, the Department of Health and Human Services (HHS) argued that Merck can’t sue the agency because it isn’t the primary manufacturer for the diabetes med Januvia—one of 10 medications up for the first round of price negotiations in 2026.
Simply put, HHS argues a Merck subsidiary is the company set to face the negotiation process, not Merck itself.
Merck has argued it stands to suffer harm from the price negotiations because it developed and markets Januvia. But that assertion is “incorrect,” according to HHS, because a "non-party" to the lawsuit, Merck Sharp & Dohme, holds the FDA license to Januvia.
"Accordingly, [the Centers for Medicare & Medicaid Service (CMS)] has asked MSD to participate in the Negotiation Program—and MSD is the entity that faces the legal obligations that Merck supposedly fears," the agency said in the filing.
When reached for comment, Merck pointed to its original statement around its lawsuit published in June. The company plans to respond to HHS' latest argument in court, a company spokesperson added over email.
"We are confident that this argument lacks merit and that the government will not succeed in stalling an adjudication of the substance of this lawsuit," he said.
HHS also challenged Merck’s contention that the IRA price negotiations violate the company's First and Fifth Amendments. In its lawsuit, Merck said the law illegally compels the company to participate in the pricing talks and hand over drugs it doesn’t wish to sell at reduced prices.
But, as HHS sees it, if a manufacturer decides it doesn't want to make a drug available to Medicare patients at the negotiated price, it can withdraw from the Medicare and Medicaid markets entirely without incurring a penalty.
Drug companies have argued it's unrealistic to ask them to remove their entire portfolios from Medicare and Medicaid as a condition of the negotiations. For companies that refuse to negotiate and pull out of Medicare, the law establishes steep financial penalties.
Aside from Januvia, other drugs set to face the first round of negotiations are Johnson & Johnson’s Imbruvica, Stelara and Xarelto plus Bristol Myers Squibb’s Eliquis, Novartis’ Entresto, Eli Lilly’s Jardiance, AstraZeneca’s Farxiga, Novo Nordisk’s Fiasp and Amgen’s Enbrel.
While Merck was the first to sue over the Medicare price negotiations, the company is far from the only drugmaker suing over the IRA. Most recently, Novartis, AstraZeneca and Boehringer Ingelheim challenged the law.
In a September filing, Novartis, whose drug Entresto is up for pricing talks, called the negotiation process a "sham" and slammed the potential tax penalties for uncooperative companies as "draconian" and "wildly disproportionate to the punished conduct."
Much like Merck, Novartis also argued that the negotiation setup is an “unconstitutional taking of private property,” which violates the Fifth Amendment.
Meanwhile, Japan's Astellas Pharma withdrew its legal challenge to the IRA earlier this month. Many industry watchers had expected Astellas' Pfizer-partnered cancer blockbuster Xtandi to be included on CMS' price talks list. But after the drug failed to make the cut, Astellas pulled its lawsuit.
In AZ’s case, the company cited the 1983 Orphan Drug Act (ODA) and the “unintended consequences” the new law could have on that legislation. In a statement, the company said the IRA’s Medicare price negotiation measures “run headlong into the goals” of the ODA.
Boehringer, for its part, argued that the price talks would step on its “constitutional and statutory rights.”
That argument is similar to the one made by other drugmakers who’ve sued, such as Merck, BMS and J&J, along with the trade group PhRMA and the U.S. Chamber of Commerce.