Today, Merck challenged the constitutionality of the Drug Price Negotiation Program for Medicare, under the Inflation Reduction Act. Generally, the word "negotiation" suggests a voluntary transaction between two parties. But negotiating with the government is seldom voluntary. You can't just walk away. The New York Times describes the process this way:
Experts noted that the negotiation process gives drug makers leeway to reject Medicare's final offer and walk away without a deal if they are not happy, subject to a tax. [Update: The Times updated the story to include the following sentence] But Merck's lawsuit said that for one of the company's drugs, the tax for refusing an offer could amount to tens of millions of dollars on the first day and rise to hundreds of millions daily after a few months.
And how much is that "tax"? The amount starts at 186% of the drug's daily revenue, and increases to 1900% of the drug's daily revenue. Merck claims that it would have to pay tens of millions of dollars on the first day after it refuses to negotiate, and that amount could escalate to hundreds of millions per day after a few months. Is this a tax? Or a penalty? For those keeping track at home, Congress projected that the exaction, whatever it is, would raise no revenue, since non-compliance would bankrupt any company.
