Pharma’s strike-from-all-sides attack on the IRA could be decided by the Supreme Court

The pharma industry is striking back against the Inflation Reduction Act with a spate of new lawsuits that take a hit-them-from-all-sides approach, with companies and industry groups targeting different elements of the controversial legislation.

Specifically, Merck & Co. and Bristol Myers Squibb are attacking the IRA using the First and Fifth Amendments while industry lobbyists and co-litigants also include the Eighth Amendment in their lawsuit. 

Such an approach could be intentional, according to William Soliman, CEO and founder of the Accreditation Council for Medical Affairs.

“They are using a multi-pronged approach in tandem,” he said. “The purpose (is) to hit the government on all ends and to ultimately force them to overturn or seriously limit the impact IRA can have.”

Passed in 2022, the IRA was designed to lower inflation while pumping up certain areas of the economy such as manufacturing and domestic energy. And although the pharma industry has largely been supportive of many measures in the IRA, the law has also drawn sharp criticism for its potential impact on innovation. Some have also argued that it could broadly raise the costs of drugs instead of lowering them.

Now, the various Constitutional-approach in the lawsuits could set up an eventual showdown between the industry and government in front of the Supreme Court.

The attack from companies 

Merck was the first company to file suit against the government in early June, and its complaint did not mince words. In particular, it zeroed in on the IRA’s Medicare Drug Price Negotiation Program, calling it a “sham,” “tantamount to extortion” and “obvious” in the ways that it violates the Constitution.

---

“The purpose (is) to hit the government on all ends and to ultimately force them to overturn or seriously limit the impact IRA can have.”

William Soliman

CEO, founder, Accreditation Council for Medical Affairs

---

According to Merck, because the Negotiation Program isn’t a true negotiation and uses monetary penalties to compel manufacturers to agree to the government’s dictated price, the IRA violates the Fifth Amendment.

The “Fifth Amendment requires the Government to pay ‘just compensation’ if it takes ‘property’ for public use. Yet the singular purpose of this scheme is for Medicare to obtain prescription drugs without paying fair market value,” Merck said in its complaint.

Merck also argues that by forcing companies to pretend its price mandates are actually negotiations, the government “makes a mockery of the First Amendment” and is tantamount to “political deception.”

“Conscripting companies to legitimize government extortion is the sort of parroted orthodoxy that the First Amendment’s compelled-speech doctrine forbids,” the complaint said.

Less than two weeks after Merck filed its lawsuit, Bristol Myers Squibb filed one of its own, making the same First and Fifth Amendment arguments regarding the Negotiation Program.

In its statement about the lawsuit, Bristol Myers Squibb also pointed out that it continues to support certain IRA provisions, such as capping out-of-pocket costs for Medicare patients and allowing them to pay those costs over the course of a year.

Trade groups’ approach

In late June, trade groups joined the fray with a lawsuit of their own.

Pharmaceutical Research and Manufacturers of America (PhRMA), the National Infusion Center Association and the Global Colon Cancer Association filed a complaint that added Eighth Amendment concerns to the IRA’s price-setting provisions.

It argues that the IRA’s “extreme excise ‘tax’ to force manufacturer compliance with the government mandated price … is disproportionate to the purported offense making it an excessive fine prohibited by the Eighth Amendment.”

“IRA is implementing a tax that starts at 186% of the drug’s annual revenue and which can go as high as 1,900% for noncompliance, basically penalizing the industry,” Soliman explained. “But they see that as a punishment that doesn’t fit the crime, so to speak.”

Will others join?

The drug price negotiation program isn’t the only part of the IRA the industry takes issue with.

For instance, one part of the IRA that the Biotechnology Innovation Organization (BIO) is most concerned with is the “discrepancy between small molecules and large molecules in terms of the period of exclusivity” and the “disincentive for the development of small molecules relative to large molecules,” Rachel King, BIO’s interim CEO, told PharmaVoice earlier this spring.

That raises the question: Will other companies or organizations add their own lawsuits to the fight against the IRA?

King said BIO would consider whether there are “opportunities, legislatively, to actually change some aspects” of the IRA. BIO did not reply to a request for an update.

Soliman believes that it’s likely others will follow suit with complaints of their own.

“I do believe others will join because if the industry can show a coalition, that will make the case stronger with more resources and harder to fight for the government,” he said.