Healthcare stock Merck (NYSE:MRK) is deeply annoyed with the U.S. government. Sufficiently so, in fact, that it’s set to sue to stop certain parts of the Inflation Reduction Act. Particularly those parts that relate to drug pricing. Merck’s shareholders, meanwhile, aren’t happy about Merck’s plan to go tilting at windmills, and Merck’s share price is down accordingly in Tuesday afternoon’s trading.
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Merck is taking a novel approach to its suit, alleging that just allowing government agencies to negotiate with drugmakers for lower drug prices is, somehow, unconstitutional. Specifically, it somehow violates both the First Amendment and the Fifth Amendment. With the First Amendment, Merck notes that it really isn’t a “voluntary participant” in the program. Thus, it’s being “coerced” into signing agreements over drug prices. As for the Fifth, Merck asserts that the government is taking its property—innovations in medicine—without “just compensation.”
Merck is looking for an injunction and wants the drug negotiation program publicly declared unconstitutional as part of a slate of potential remedies. A Politico report even featured Merck claiming that the program was “tantamount to extortion.” With several of Merck’s drugs about to come up for said negotiation starting September 1, there’s clearly an impetus for Merck to defend its turf while it has turf to defend.
Analysts, meanwhile, remain largely in Merck’s corner. Merck stock is currently considered a Moderate Buy, supported by 14 Buy ratings and five Hold ratings. Further, Merck stock offers investors 12.18% upside potential thanks to its average price target of $123.35.
