The Biden Administration has released its highly anticipated list of 10 drugs selected for Medicare drug price negotiation under the Inflation Reduction Act. The list contains several drugs that may face generic/biosimilar competition before, or very soon after, the negotiated prices start. Therefore, the commercial impact could likely be minimal for some of the drugs, says GlobalData, a leading data and analytics company.
The Medicare drug price negotiation program is one of the most controversial provisions of the Inflation Reduction Act and aims to save $25 billion in drug cost savings for the US government. The list of drugs has been selected based on Medicare Part D spending from June 2022 to May 2023, and the pharma companies involved will have to sign an agreement to enter price negotiations with the Centers for Medicare & Medicaid Services (CMS) by 1 October 2023. Failure to do so would mean the companies face steep tax penalties or even the risk of losing Medicare and Medicaid coverage entirely, says
Cyrus Fan, Pharma Analyst at GlobalData, comments: “Every major pharma company has been dreading this day since the Inflation Reduction Act was approved last summer. Pharma companies are now rethinking pipeline and launch strategies to minimize the impact of the Inflation Reduction Act. Industry advocates continue to emphasize that innovation and patient access to new therapies will be affected.”
Pharma companies will now need to provide confidential information on new data points to help determine the initial maximum fair price. This extra data includes R&D costs, receipt of federal financial support, and data on revenue and sales volume. The CMS will have until 1 February 2024 to submit an initial offer of a maximum fair price with justifications, and the affected companies will then have 30 days to respond. After that, the CMS must publish the agreed negotiated price by 1 September 2024, and that new price will take effect on 1 January 2026.
Fan continues: “The list of drugs selected for negotiation is mostly unsurprising and contains medicines on which Medicare spends the most. The CMS estimates Medicare enrollees spent $3.4 billion in out-of-pocket [OOP] costs from all 10 drugs covered under Part D in 2022. The price negotiations will benefit Medicare beneficiaries, leading to reduced OOP spending, and could mean higher compliance with therapy. The pharma companies will now communicate with the CMS and likely provide a compelling argument on the economic analysis around their respective products.”
As expected, the pharmaceutical industry and industry advocates have continued to react negatively and have criticized the list. Some pharma companies have pointed out that many of the selected drugs already have significant rebates and discounts, and the Medicare drug price negotiation program has begun to affect R&D development.
Fan concludes: “It’s clear from the multiple lawsuits filed so far that the pharma industry will continue to fight the US government over these Medicare price negotiations and will attempt to delay the process. New lawsuits will likely come from companies whose products did not make the list this time, out of fear of being selected for price negotiations in future years.
“The rising number of lawsuits also likely means the cases will head to the US Supreme Court for judgement, although the Biden Administration is highly confident in its ability to prevail in cases seeking to derail the Inflation Reduction Act and believes the law is on its side.”
