Drug companies have been railing against the law since it was passed last year. The provisions won't take effect until 2026, but the administration is slated to release a list of the first 10 drugs for negotiation on Sept. 1.
The law only applies to certain drugs that have been on the market for years without generic competition. Merck's diabetes drug Januvia is likely to be on that initial list, and the company's cancer blockbuster Keytruda could be eligible in 2028.
The industry will be watching the results of this lawsuit closely, as other companies have also indicated they could sue. They argue the law stifles their ability to invest in new cures.
In the complaint, Merck argued the Inflation Reduction Act is unconstitutional. First, they said the law allows the government to force drugmakers to sell their property without "just compensation" at prices the government decides, in violation of the Fifth Amendment.
Medicare's negotiation efforts are "tantamount to extortion," Merck said.
The company also argued that the program would violate Merck's First Amendment rights by coercing the company to participate in the negotiation program. Under the law, drugmakers can reject Medicare's final offer and walk away without a deal, but that is subject to a tax. And Merck said the tax could cost hundreds of millions of dollars a day.
"It involves neither genuine 'negotiations' nor real 'agreements.' Rather, once HHS unilaterally selects a drug for inclusion in the program, its manufacturer is compelled to sign an 'agreement' promising to sell the drug to Medicare beneficiaries at whatever 'fair' price the agency dictates, which must represent at least a 25% to 60% discount," the company said.
Health and Human Services Secretary Xavier Becerra tweeted that the administration would "vigorously defend" the law.
White House press secretary Karine Jean-Pierre said the lawsuit was a typical drug industry argument.
"Any time profits of the pharmaceutical industry are challenged, they make claims about it hindering their ability to innovate. Not only are these arguments untrue, but the American people do not buy them," she said.
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