The Inflation Reduction Act’s Negative Impact on Patient-Focused Innovation, Value and Access
June 6, 2023 9:01 am ET
Dear Merck Community,
For more than 130 years, Merck has been guided by the view that great medicines and vaccines change the world. We put the patient at the center of everything we do and use the power of leading-edge science to save and improve lives.
Our role is to engage in the most risky and costly part of discovery — to invent something that’s never existed in the history of the world that will unlock treatments and cures for disease. This invention is then followed by extensive clinical trial programs to demonstrate safety and effectiveness. And more often than not, these programs do not result in commercial drug products. In fact, over 90% of the time, these programs do not result in FDA-approved products.
On average, it takes a decade and more than $2.5 billion to develop a new drug. Since 2000, companies like ours have invested more than $1.1 trillion in the search for new treatments and cures, including $102.3 billion in 2021 alone. This investment has led to incredible breakthroughs for patients.
Unfortunately, this progress is now at risk due to unconstitutional provisions in the Inflation Reduction Act (IRA), necessitating the legal action Merck has taken in U.S. Federal Court against the United States government. We believe this program will negatively impact biopharmaceutical innovation and the sector’s work to develop lifesaving and life-changing innovations. In turn, it will have devastating consequences for millions of patients in need.
As we detail in our complaint, the Fifth Amendment requires the U.S. 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. Under the IRA, the government will take Merck’s patented innovations by coercing the company to provide third parties with access at prices the government sets.
In addition, the IRA creates the false impression that innovators like Merck are voluntary participants in its program by coercing them to sign an “agreement” conveying that the government-set prices are the “fair” result of a “negotiation.” That compelled mirroring of the government’s political message violates the First Amendment.
Patients and the public need biopharmaceutical innovation to address global health challenges like cancer and Alzheimer’s disease, and the IRA is negatively affecting critical research and development. By changing the incentives and returns for some therapies and technologies over others, the IRA is changing the course of R&D, which in time will leave many patients without treatment options.
Take for example the impact on cancer therapies. Investments by Merck and others in the biopharmaceutical sector have led to important progress in the treatment of earlier-stage cancer, most notably lung cancer. With increased adoption of screening, we have now reached an inflection point at which we are poised to bend the trajectory of the societal burden of cancer. The IRA makes further investment in treatments for earlier-stage cancer and screening far more difficult.
The IRA requires the Centers for Medicare and Medicaid Services to begin setting prices on small molecule medicines at 9 years and large molecule medicines at 13 years. This deters advancing treatments proven effective in later stages of cancer into earlier stages of disease, where the prospect of durable remission is most real. This is tantamount to grabbing defeat out of the jaws of victory, just when science might offer the prospect of a cure.
Merck is at the cutting edge in the pursuit of curative therapies, and we know our work isn’t done. While we do not believe the program is the right approach for continuing to advance global health on behalf of millions of patients in need, Merck remains committed to working with the U.S. government to enable patient-focused innovation, value and access. We also remain committed to addressing devastating diseases like cancer, but we need to make sure innovation is supported and encouraged by creating a policy environment conducive to the kind of sustained investment that leads to new treatments and lifesaving and life-improving breakthroughs for patients.
Sincerely,
Rob Davis – Chairman and Chief Executive Officer
Dean Li – EVP and President, Merck Research Laboratories
Jennifer Zachary – EVP and General Counsel
Jannie Oosthuizen – President, Merck Human Health U.S.
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About Merck
At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.
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