Merck Faces Keytruda Price Cuts Under IRA by 2028

Merck expects its leading cancer drug, Keytruda, to be included in government price negotiations under the IRA starting in 2026 as its U.S. patent expires at the end of 2028.

In 2024, Keytruda accounted for 46% of Merck’s total sales, and Merck’s CEO has expressed that price-setting via Medicare could limit the development of new therapies. To address potential revenue losses post-2028, Merck is advancing a subcutaneous formulation of Keytruda, which has shown positive Phase 3 results and may be exempt from IRA price negotiations, offering more pricing flexibility.

The following article originally appeared in Fierce Pharma.

Merck is bracing for the years of sales growth from oncology superstar Keytruda to take a sharp turn in 2028—and for more reasons than one.

Along with a key U.S. patent expiring at the end of that year, the company expects the U.S. government to select the drug for Inflation Reduction Act "government price setting" process in 2026. The negotiated prices would then take effect in January of 2028, Merck said in a recent annual SEC filing.

“As a result, U.S. sales of Keytruda will decline after that time," the company explained in the filing.

The company has long dreaded 2028 for the patent expiration alone, but it has been focused on striking business development deals to help pad Keytruda’s fall and drive growth into the next decade. With over 40 indications in the U.S. and 30 in Europe, the drug is far and away Merck’s top sales driver, pulling down $29 billion in 2024.

While no biosimilars have yet been approved, several companies are scrambling to carve out their own piece of Keytruda’s market, with copycats in late-stage development from Celltrion, Samsung Bioepis, Amgen and more. In Europe, the therapy has a few more years before it dives off the patent cliff, with its market exclusivity expected to end there in 2031.

The IRA, however, presents a different challenge. Merck has already had two drugs picked for the yearly list of drugs subject to price negotiations, with a 79% Medicare price cut set to go into effect for its Januvia in 2026 and price negotiations for its Janumet and Janumet XR set to begin this year. The negotiated prices for the Janumet franchise will take effect in 2027.

Merck was the first of many drugmakers to sue the U.S. government in 2023 over the “sham” pricing negotiations, claiming violations of the Constitution’s First Amendment and Fifth Amendment. The Department of Health and Human Services (HHS) responded by arguing that the New Jersey drug giant “lacks standing” to take its grievance to court, pointing to a subsidiary's ownership of an FDA license to Januvia.

Still, it’s not a fight Merck is willing to give up on just yet.

“The long-term implications of the IRA remain uncertain and subject to various factors, including the manner in which HHS decides to implement the statute,” Merck explained in its filing. “Many experts and analysts, both within the industry and outside, have predicted that the law will harm innovation in the pharmaceutical industry and result in fewer new treatments being developed and approved over time. Merck is working to mitigate the potentially harmful effects that the law could have, which could include a detrimental impact on innovation.”

Keytruda, for example, is a “once-in-a-lifetime, lighting-in-a-bottle” discovery that wouldn’t be possible to achieve in the same way under the IRA, Merck CEO Robert Davis warned last year.

The IRA was passed in 2022 during former President Joe Biden's term, leaving some in the pharma industry to hope that the new Trump administration may tweak the program. Last month, the Centers for Medicare & Medicaid Services issued a release pledging to provide “opportunities for stakeholders to provide specific ideas to improve the Negotiation Program.”

Still, the government recently sided with the legal arguments used by the Biden administration in ongoing IRA-related litigation from Novartis earlier this month. That development came before President Trump’s meeting with leaders from the Pharmaceutical Research and Manufacturers of America (PhRMA), who sought to garner support for adjustments to certain IRA pricing provisions.

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