Merck is preparing for a big change in the sales of its cancer drug, Keytruda, in 2028. This is because a crucial U.S. patent will expire, and the U.S. government plans to include Keytruda in a price negotiation process set by the Inflation Reduction Act (IRA), starting in 2026. The new prices from these negotiations will be effective in 2028, which will likely reduce U.S. sales of Keytruda.
Keytruda is Merck’s top-selling drug, earning $29 billion in 2024, and is used to treat over 40 conditions in the U.S. and 30 in Europe. Although no similar drugs (biosimilars) have been approved yet, other companies like Celltrion and Amgen are working on their versions. In Europe, Keytruda’s patent protection lasts until 2031.
The IRA poses a challenge to Merck and other pharmaceutical companies. It allows the government to negotiate drug prices, which could lead to significant price cuts. For instance, Merck’s diabetes drug, Januvia, will see a 79% price cut in 2026. Merck has taken legal action against the U.S. government, claiming these negotiations violate certain constitutional rights, but the government argues that Merck doesn’t have a valid case.
Merck is worried that the IRA could harm drug innovation, making it harder to develop new treatments. The company is trying to minimize these negative effects. Merck’s CEO mentioned that discoveries like Keytruda might not be possible under these new rules.
The IRA was passed in 2022. Some in the pharmaceutical industry hope that future government changes might alter the program. The Centers for Medicare & Medicaid Services recently announced they are open to suggestions for improving the negotiation process. However, the government has supported the legal arguments made during the Biden administration against similar challenges.