Big Pharma has been raging against the US’s Inflation Reduction Act (IRA) ever since it was passed last year. Merck (MSD global) has recently taken its indignation a step further and sued the US government, arguing that the new legislation violates the constitution, but shareholders at the ICCR are not pleased.


The inappropriate use of corporate resources and misuse of the US legal system to file this lawsuit against HHS is not what we would expect from a company espousing the values of greater access and affordability

Lauren Compere of Boston Common Asset Management

Bold Action and Pushback

According to Merck, the IRA, which will allow Medicare to negotiate certain US drug prices, violates the Fifth and First Amendments to the American Constitution. In an attempt to block the law, the firm filed a lawsuit in the US District Court for the District of Columbia on June 6th, claiming that under the IRA, pharma companies would be forced to negotiate prices below market rates. The company’s shareholders at Interfaith Center on Corporate Responsibility (ICCR), however, are not happy.

In a reaction statement from the ICCR, the group states investors’ support of the IRA’s drug pricing measures. “This commonsense legislation, with considerable bipartisan support, has long been needed to bring balance to the way drug prices are set in the US. Until now, the pricing strategies of drug makers have largely been one-sided with the drug companies setting the prices with no consideration for the benefit of patients,” says ICCR member Christina Dorett. Expressing the ICCR’s dissatisfaction with Merck’s legal action, Dorett proceeds, “We find it rich that Merck’s lawsuit characterizes these provisions as “unconstitutional and extortionist” – a great example of the pot calling the kettle black.”

ICCR investors ask Merck to reconsider its legal action and cite the company’s Access to Health Principles, in which it states that it “develops, tests and implements innovative solutions that address barriers to access and affordability of our medicines and vaccines.” “If Merck truly puts its patients and society first, then the company should align its statements with its actions,” states Lauren Compere of Boston Common Asset Management. “This action suggests that Merck is willing to protect profits even if it comes at the expense of patients. Needless to say, the inappropriate use of corporate resources and misuse of the US legal system to file this lawsuit against HHS is not what we would expect from a company espousing the values of greater access and affordability,” she adds.


Big Pharma Complaints

Leaders from multinational pharma have been vocal about their opposition to the IRA, contending that it will mean a loss of revenues due to uncertain profitability margins and thus impact these companies’ abilities to invest in and develop lifesaving medical innovations. AstraZeneca’s Pascal Soriot has claimed it will curb the development of medicines with smaller indications and lower sales potential, such as second and third line therapies for cancer while Eli Lilly cited the IRA as the reason behind the elimination of one of its cancer drug programmes. Yet Merck is the first company to take legal action.

Biogen CEO Chris Viehbacher, speaking at BIO 2023, supported the company’s action, claiming that the “lawsuit is a tiny bombshell compared to the bombshell we got in the industry when the law passed.” He further seconded Merck’s comparison of IRA negotiations to extortion. “Whenever you hear that this is a negotiation, it’s not. In Merck’s lawsuit, they talk about extortion and that’s accurate.”

The IRA is the Biden administration’s effort to tackle the raging medicine prices in the US, a country that pays more for prescription drugs than any other. The new legislation is looking to save USD 25 billion annually by 2031 by negotiating the prices of drugs paid for by the government health insurance for over 65s, Medicare.