Mixed prospects for Merck lawsuit against US federal government

On Tuesday, US pharma giant Merck & Co (NYSE: MRK) filed a lawsuit in the US District Courts against the federal government alleging that the drug pricing clauses of the Inflation Reduction Act (IRA) of 2022 violates the First and Fifth Amendments to the US Constitution. Merck’s shares closed down 2.7% at $110.01 following the announcement.

In an accompanying statement, Merck said: “By coercing Merck to provide its drug products at government-set prices, the program takes property for public use without just compensation…..Merck intends to litigate this matter all the way to the US Supreme Court if necessary.”

As detailed in its complaint, Merck noted that the Fifth Amendment requires the US government pay “just compensation” if it takes property for public use. However, the IRA allows the government to obtain innovations without providing fair value for them.