Merck, AstraZeneca, Bristol Myers Squibb to participate in Medicare drug price negotiations

Merck, AstraZeneca, Bristol Myers Squibb and Boehringer Ingelheim on Wednesday told CNBC they will agree to participate in the first round of Medicare drug price negotiations, even after all four drugmakers sued to halt the process last month.

Merck's Type 2 diabetes drug Januvia, AstraZeneca's own diabetes drug Farxiga, Boehringer Ingelheim's diabetes drug Jardiance and Bristol Myers Squibb's blood thinner Eliquis are among the first 10 drugs selected for price talks with Medicare. 

The four companies appear to be the first manufacturers to indicate that they will comply with the negotiations, which seek to rein in the rising costs of prescription drugs for older Americans. 

Manufacturers of the other six drugs selected have until Oct. 1 to sign an agreement to participate in the process. Those companies did not immediately respond to CNBC's request for comment about their intentions.

A spokesperson for Merck said in a statement that the company will sign the agreement to participate "under protest," noting that it disagrees on "both legal and policy grounds" with the negotiations.

But "withdrawing all of the company's products from Medicare and Medicaid would have devastating consequences for the millions of Americans who rely on our innovative medicines, and it is not tenable for any manufacturer to abandon nearly half of the U.S. prescription drug market," the spokesperson said. "The choice between doing so and weathering the [Inflation Reduction Act's] massive fines and taxes is no choice at all."

If drugmakers decline to engage in the negotiations, they could be forced to pay an excise tax of up to 95% of their medication's U.S. sales or to pull all of their products from the Medicare and Medicaid markets, according to the Centers for Medicare and Medicaid Services.

A spokesperson for Bristol Myers Squibb similarly said the company has "no choice other than to sign the 'agreement'" due to the penalties outlined by CMS.

An AstraZeneca spokesperson said the company remains "committed to ensuring patients have access to FARXIGA and plan to participate in the process outlined by CMS to communicate the value of FARXIGA to people covered by Medicare."

Boehringer Ingelheim, which is privately held, said in a statement it is "committed to engaging in open and transparent conversations" with CMS.

Merck, Bristol Myers, AstraZeneca, Boehringer Ingelheim and other drugmakers like Johnson & Johnson have filed at least eight separate lawsuits in recent months seeking to declare the negotiations unconstitutional. Another lawsuit from the Chamber of Commerce, one of the biggest lobbying groups nationwide, is seeking a preliminary injunction, which aims to block the negotiations before Oct. 1. 

The pharmaceutical industry fiercely opposes the process because it believes it will threaten its revenue growth, profits and drug innovation. However, analysts expect minimal financial losses for companies, at least initially, since most of the drugs selected already face upcoming patent expirations that will likely weigh on revenue.

For example, Farxiga will lose its market exclusivity in 2026, which will open up the market to generic alternatives. That's the same year renegotiated prices are set to take effect.

The Inflation Reduction Act, which narrowly passed Congress last year along party lines, empowered Medicare to negotiate drug prices for the first time in the program's six-decade history. The law is the central pillar in the Biden administration's efforts to control rising drug prices and was a major victory for the Democratic Party.

The administration named the first round of drugs set to face price talks last month, kicking off a lengthy negotiation process that will end in August 2024.