Merck has taken the lead, filing a lawsuit seeking to overturn drug pricing measures in the Inflation Reduction Act (IRA). Now, emboldened by the New Jersey drugmaker, the leaders of other companies are making their concerns public.
At the BIO International Convention, Tuesday in Boston, Biogen CEO Chris Viehbacher registered severe criticism of the IRA and said his company also was considering filing a suit.
“Merck’s lawsuit is a tiny bombshell compared to the bombshell we got in the industry when the law passed,” Viehbacher said. “Whenever you hear that this is a negotiation, it’s not. In Merck’s lawsuit, they talk about extortion and that’s accurate.”
Under the IRA, Medicare will begin negotiating prices for the drugs that it spends the most on beginning in 2026. Because companies can’t walk away from these negotiations, some industry leaders have said the setup is akin to “price controls.”
Merck’s suit—which targets the Department of Health and Human Services—calls the drug price negotiation system a “sham.” The company wants to prevent the HHS from forcing it to participate in the program.
“I would challenge the fact that we even have a system of logical negotiation,” Novartis CEO Vas Narasimhan, said on Tuesday in Chicago at a luncheon hosted by industry association PhRMA. “The law is draconian in how it is set up.”
Merck argues that the negotiation program violates the Constitution’s Fifth Amendment because it takes private property for public use. The company also says that the IRA infringes the First Amendment as it prohibits free speech by requiring firms to agree that the pricing is fair.
Analysts at GlobalData dismiss Merck's First Amendment claim but believe that the Fifth Amendment argument has potential.
Through discussions with lawmakers, PhRMA director Steven Ubl believes that some measures can be adjusted by educating lawmakers on the “unintended consequences” of the IRA.
“Before the law passed, these were largely theoretical conversations,” Ubl said at the PhRMA event. “Whereas today, we’re having very specific conversations about what is happening as companies reshape their R&D pipelines. We’re cautiously optimistic that over time, there will be appetite for change.”
According to Narasimhan, the law will change how companies manage innovation. He points to Novartis cancer drug Gleevec as one that flourished late in its period of market exclusivity because of the amount of development the company conducted to expand its eligible treatment population. Under the new system, the incentive to follow that R&D strategy may be lost, he said.
“Many cancer medicines over time, if anything, their cost effectiveness goes up the longer they're researched in different areas,” Narasimhan said.
Genentech CEO Alexander Hardy added that the company’s cancer drug Rituxan gained an approval to treat a rare disease, pemphigus vulgaris, 22 years after its original approval in 1987.
“That's a very devastating condition, with a small population,” Hardy said. “[Under IRA] we wouldn't be able to do that sort of research.”
Additionally, Hardy and Narasimhan pointed to cancer drugs in their respective pipelines that are designed for multiple indications and could reach the market soon but will be held back until they are ready to serve the indication with the largest patient population.
“We shouldn’t have a systematic government policy that’s going to hurt cancer patients,” Narasimhan said. “Given our fiduciary responsibilities, these are the trade-offs we’re being faced with.”
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