The suit is little more than a PR stunt (by the ill-advised Rob Davis, Merck’s CEO) — and the effort is… failing.

As we mentioned last week, Astellas has voluntarily dropped their version of this nonsense. And now, HHS has filed a muscular explanation as to why it is not “coercion” to have to at least attempt to negotiate in good faith on drug prices — even with an admittedly large customer. That is nothing of constitutional import.

That is… a free market, in practice — at work. Here’s some of the best of these 46 pages — but do read it all:

…As courts have repeatedly explained, “participation in the Medicare program is a voluntary undertaking.” Livingston Care Ctr., Inc. v. United States, 934 F.2d 719, 720 (6th Cir. 1991); see Baptist Hosp. E. v. Sec’y of Health & Hum. Servs., 802 F.2d 860, 869-70 (6th Cir. 1986) (same); see also Baker Cnty., 763 F.3d at 1279-80 (surveying cases); Garelick, 987 F.2d at 917 (same).

Unlike public utilities, which “generally are compelled” by statute “to employ their property to provide services to the public,” no statutory provision requires entities to participate in Medicare or to sell their property. Garelick, 987 F.2d at 916. So whether confronting regulations limiting physician fees, nursing-home payments, or hospital reimbursements, courts have been unequivocal: entities are not required to serve Medicare beneficiaries, and thus the government deprives them of no property interest for purposes of the Fifth Amendment when it imposes caps on the amount the government will reimburse. Baptist Hosp., 802 F.2d at 869-70; see also Se. Ark. Hospice, Inc. v. Burwell, 815 F.3d 448, 450 (8th Cir. 2016) (no taking because plaintiff “voluntarily chose to participate in the Medicare hospice program”); Baker Cnty., 763 F.3d at 1279-80 (rejecting hospital’s “challenge [to] its rate of compensation in a regulated industry for an obligation it voluntarily undertook . . . when it opted into Medicare”); Franklin Mem’l Hosp., 575 F.3d at 129-30; Garelick, 987 F.2d at 916-19; Burditt v. HHS, 934 F.2d 1362, 1376 (5th Cir. 1991); Whitney v. Heckler, 780 F.2d 963, 972 (11th Cir. 1986) (“[A]ppellants are not required to treat Medicare patients, and the temporary freeze is therefore not a taking within the meaning of the Fifth Amendment.”). If a provider dislikes the conditions offered by the government, it can simply withdraw from the program. Baptist Hosp., 802 F.2d at 869-70. There is no legal compulsion to participate….

The Negotiation Program is no different. The IRA regulates neither the prices manufacturers may charge for drugs generally nor the conduct of manufacturers that do not participate in Medicare or Medicaid. See, e.g., 42 U.S.C. § 1320f-1(b), (d). Rather, Congress established the Negotiation Program in an effort to reduce how much Medicare pays for selected drugs provided to Medicare beneficiaries. See id. § 1320f-2(a)(2). As CMS noted, “the IRA expressly connects a… [m]anufacturer’s financial responsibilities under the voluntary Negotiation Program to that manufacturer’s voluntary participation” in Medicare and Medicaid. Revised Guidance at 120; see also 26 U.S.C. § 5000D(c)(1) (providing that tax consequences are only applicable if the manufacturer continues to participate in Medicare and Medicaid). Drug manufacturers that do not wish to make their drugs available to Medicare beneficiaries at negotiated prices can avoid doing so by withdrawing from the Medicare and Medicaid markets. See Revised Guidance at 33-34, 120-21, 129-31.

Alternatively, a manufacturer can divest its interest in the selected drug or otherwise stop selling it to Medicare beneficiaries — either permanently or temporarily — which would expose it to no penalty or tax. Id. at 131-32. Thus, contrary to Merck’s claims, no manufacturer is being forced to make sales under the Negotiation Program. Contra Pl.’s Br. at 8, 11. Unlike laws requiring utilities to serve the public, the IRA does not “compel[] [manufacturers] to employ their property to provide [drugs] to” Medicare beneficiaries—at any price. Garelick, 987 F.2d at 916. Rather, a manufacturer of a selected drug is only required to provide “access” to negotiated prices if it chooses to participate in Medicare and make its drugs available for Medicare coverage. As courts have explained in rejecting Fifth Amendment challenges to other Medicare conditions, “[i]f any provider fears that its participation [in the program] will drive it to insolvency, it may withdraw from participation.” Baptist Hosp., 802 F.2d at 869-70. The choice is the manufacturer’s to make….

Attempting to evade this well-settled precedent, Merck asserts that the IRA makes it impossible for manufacturers to withdraw from the Negotiation Program without incurring a sizeable tax or a penalty — making the choice to leave the program “illusory.” Pl.’s Br. at 42-44. But Merck’s arguments about the process for withdrawal rest on a misunderstanding of the IRA’s provisions. Section 11003 of the IRA provides that manufacturers will incur no tax if they cease participating in Medicare and Medicaid prior to the statutory deadline to enter into an agreement to negotiate — or, if they have initially agreed to negotiate, prior to the statutory deadline to enter into a final pricing agreement with CMS….

It may not be preposterous on its face to argue that Merck, or any pharma concern, has a God-given right to charge anything it wants, for its meds — but the government is never required to pay that price.

As my second graphic indicates, it may simply break the glass, at the patent office — and make its own version, if saving human lives requires the same, due to Merck’s exorbitant pricing. Mr. Davis would do well to bear that possibility in mind, and start tip-toeing through this garden, rather than stomping (ultimately impotently) about, in these big, muddy discredited old red rubber boots. Grin.

नमस्ते