Merck (NYSE:MRK) on Tuesday announced it is suing the Biden administration over Medicare’s new powers to substantially reduce drug prices for seniors under the Inflation Reduction Act, the opening salvo in the pharmaceutical industry’s efforts to weaken the program.
In a complaint filed in federal court in Washington D.C., Merck excoriated the negotiation process as a “sham” and “tantamount to extortion.”
The drugmaker accused the federal government of employing what the company described as an unconstitutional scheme to take private property for public use without just compensation in violation of the Fifth Amendment.
The Inflation Reduction Act, which became law last summer, was a major victory for President Joe Biden and Democrats in Congress, who have long pushed to empower Medicare to combat rising drug prices.
The pharmaceutical industry has fiercely opposed the law, arguing it will stifle new drug development.
Merck said the Department of Health and Human Services compels companies to enter into an agreement that effectively dictates the price of a drug at a 25% to 60% discount under threat of daily excise taxes that are several times higher than the medication’s daily revenue.
Merck has asked a judge to block HHS from compelling the drugmaker to participate in the program.
MRK shares handed back $1.29, or 1.1%, to $111.82.