Pharma has a message to investors about the results of the first round of drug price negotiations under the Inflation Reduction Act: It’s fine.
Over the last two weeks, many of the drugmakers subject to IRA pricing have, for the first time, said what they think of the prices they’ve ended up with after negotiations with the Centers for Medicare & Medicaid Services. While they continue to fight the law in court and warn of the long-term consequences to R&D, the companies also took steps to emphasize that the pricing results have long been baked into their nearer-term financial guidance.
Anna Kaltenboeck, a principal at ATI Advisory and former Senate staffer who helped draft the law, said that executives’ outward confidence says little about the actual settled price. But she expects that the negotiated prices will “be significantly lower than current list prices.”
“In many cases, these drugs cost beneficiaries more in cost-sharing than plans ended up paying for the drugs,” she said. “Negotiated prices will make these drugs significantly more affordable for these patients.”
Here’s how executives have talked about the prices under the law in second-quarter earnings so far:
- Novartis CEO Vas Narasimhan on the good: “In this initial round you have a set of medicines that are relatively close to [loss of exclusivity] and because of that, companies have factored in generic entries within a certain period of time.”
- …and the bad: “When you start getting hundreds of drugs on this list and you have drugs that are earlier in their life cycle in areas where you need more time to actually generate the peak sales and the returns, I mean these compounds … it gets uglier and uglier.”
- Roche CEO Thomas Schinecker: “Regardless of whether or not it’s a Republican or a Democratic president, pricing in the US will remain, I think, a very significant issue.”
- AbbVie CEO Rob Michael: “We are hopeful that if it’s a new administration or the current administration, that they’ll reassess those provisions that ultimately are harmful for long-term patient care in the US.”
- Johnson & Johnson worldwide chairman of innovative medicine Jennifer Taubert: “While we are not in alignment with IRA and the price-setting process, those numbers have been included in the guidance that we provided last year.”
- Bristol Myers Squibb CEO Chris Boerner: “Now that we have seen the final price, we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis.”
- AstraZeneca biopharma business unit head Ruud Dobber: “We’ve come out and said that even with modeling that impact, we still expect to deliver on our long-term outlook.”
Ongoing lawsuits from multiple companies continue to challenge the pricing laws included in the IRA. Companies have also taken issue with a portion of the law that distinguishes between large and small molecules, making biologics subject to price negotiations 13 years after approval, four years longer than small molecules.
Eli Lilly CEO David Ricks said on the sidelines of this year’s ASCO annual meeting that the pricing provision is “terminating ideas before they have time to even grow roots.” Narasimhan affirmed to investors that his company’s goal is “very much still to shift the policy.”
“I think there’s a broad recognition that there needs to be something done because this was an unintended consequence of a poorly drafted legislation,” Narasimhan said.
Editor’s note: This story was corrected to reflect that AstraZeneca’s comments came from Ruud Dobber, not CEO Pascal Soriot.