Up­dat­ed: US se­lects first 10 drugs sub­ject to Medicare price ne­go­ti­a­tions

The US on Tues­day un­veiled the first 10 drugs that will be sub­ject to price ne­go­ti­a­tions un­der the In­fla­tion Re­duc­tion Act, in­clud­ing sev­er­al sur­pris­ing ad­di­tions that may face com­pe­ti­tion from gener­ics be­fore the ne­go­ti­a­tions start in 2026.

In to­tal, the drugs racked up more than $50 bil­lion in Medicare Part D spend­ing from May 2022 to June of this year, and in­clude three prod­ucts from John­son & John­son as well as block­busters from Bris­tol My­ers Squibb, Eli Lil­ly, Mer­ck and oth­ers.

The law re­quires com­pa­nies to par­tic­i­pate in the pric­ing ne­go­ti­a­tions or else pay a steep tax or risk los­ing Medicare and Med­ic­aid cov­er­age en­tire­ly. The ne­go­ti­at­ed prices for the 10 ther­a­pies will take ef­fect Jan. 1, 2026, ac­cord­ing to re­vised guid­ance pub­lished by CMS.

The list in­clud­ed sev­er­al sur­pris­es, such as J&J’s Ste­lara, which is like­ly to see biosim­i­lar com­pe­ti­tion in 2025, and No­vo Nordisk’s in­sulins, which are al­so like­ly to see com­pe­ti­tion in the next two years. Se­nior ad­min­is­tra­tion of­fi­cials said Tues­day that some drugs that were ex­pect­ed to be on the list based on pri­or-year da­ta may have been left out be­cause uti­liza­tion dropped over the last year.

Sta­cie Duset­z­i­na, pro­fes­sor of can­cer re­search at Van­der­bilt Uni­ver­si­ty School of Med­i­cine, told End­points News that the list in­cludes lots of chron­ic dis­ease med­i­cines al­though the ne­go­ti­at­ed price might not mat­ter in some cas­es if biosim­i­lar or gener­ic ver­sions come to mar­ket be­tween now and 2026. While she not­ed that there are a cou­ple of drugs where this in­com­ing com­pe­ti­tion is an­tic­i­pat­ed, it’s still un­clear how CMS sees the thresh­old of com­pe­ti­tion that will get the list­ed drugs out of ne­go­ti­a­tion.

“There are few­er can­cer drugs than ex­pect­ed and En­tresto, Farx­i­ga, and Ste­lara weren’t on pri­or lists gen­er­at­ed from old­er da­ta so they must have had in­creased prices or use or both that brought them up to the top of the list,” she said.

Ben Rome of Har­vard’s Pro­gram On Reg­u­la­tion, Ther­a­peu­tics, And Law told End­points News this morn­ing that he was sur­prised to see No­vo Nordisk’s in­sulins in­clud­ed on the list be­cause of the po­ten­tial in­com­ing biosim­i­lar com­pe­ti­tion. He al­so said it’s for­tu­itous that CMS is tar­get­ing two SGLT2 in­hibitors and two an­ti­co­ag­u­lants be­cause CMS can now ne­go­ti­ate prices si­mul­ta­ne­ous­ly for com­pet­ing drugs in the same class.

He al­so shared on X, the plat­form pre­vi­ous­ly known as Twit­ter, that the av­er­age age of the drugs on the list is 14 years, like­ly mak­ing them el­i­gi­ble for a ceil­ing price that is 60% low­er than the av­er­age net price of the ther­a­py.

But in­dus­try and some promi­nent Re­pub­li­cans lam­bast­ed the list and said it will on­ly lead to re­duced in­no­va­tion, and less in­vest­ment in small mol­e­cule de­vel­op­ment.

“To­day’s an­nounce­ment is the re­sult of a rushed process fo­cused on short-term po­lit­i­cal gain rather than what is best for pa­tients,” PhRMA pres­i­dent and CEO Stephen Ubl said in a state­ment. “Many of the med­i­cines se­lect­ed for price set­ting al­ready have sig­nif­i­cant re­bates and dis­counts due to the ro­bust pri­vate mar­ket ne­go­ti­a­tion that oc­curs in the Part D pro­gram to­day.”

House En­er­gy and Com­merce Com­mit­tee Chair Cathy Mc­Mor­ris Rodgers (R-WA) said in an emailed state­ment: “While the Pres­i­dent glee­ful­ly cel­e­brates an­nounc­ing the first ten drugs forced in­to his so­cial­ist price set­ting scheme, Amer­i­cans are al­ready see­ing few­er po­ten­tial­ly life-sav­ing cures and treat­ments.”

Be­gin­ning in Oc­to­ber, the drug­mak­ers on this list will have to sign an agree­ment with CMS and con­fi­den­tial­ly pro­vide in­for­ma­tion on sev­er­al new da­ta points, in­clud­ing R&D costs and the ex­tent to which those costs have been re­couped (aban­doned and failed drug costs will be con­sid­ered), as well as fed­er­al fi­nan­cial sup­port for the drug’s dis­cov­ery and de­vel­op­ment, and da­ta on rev­enue and sales vol­ume.

CMS has un­til Feb. 1, 2024 to send ini­tial of­fers of a max­i­mum fair price, with a jus­ti­fi­ca­tion, to each com­pa­ny for the se­lect­ed drugs on the list.

Loom­ing le­gal bat­tles

Drug­mak­ers are not go­ing to the ne­go­ti­at­ing ta­ble with­out a fight. Mer­ck was the first to file a law­suit against the fed­er­al gov­ern­ment, claim­ing the ne­go­ti­a­tion pro­gram is un­con­sti­tu­tion­al and will stymie in­no­va­tion, par­tic­u­lar­ly among small mol­e­cule drugs. That suit was soon fol­lowed by oth­ers from Bris­tol My­ers, J&J, Boehringer In­gel­heim, Astel­las and As­traZeneca, among oth­ers.

The law is the most ag­gres­sive fed­er­al drug pric­ing ef­fort to date and has been round­ly crit­i­cized by phar­ma­ceu­ti­cal com­pa­nies, though some ex­perts have re­fut­ed the IRA’s like­ly im­pact on R&D.

An­a­lysts at Leerink Part­ners told in­vestors on Sun­day that the ne­go­ti­at­ed prices are like­ly im­ma­te­r­i­al through 2028 be­cause “the es­ti­mat­ed prof­it hits rep­re­sent a small per­cent­age of glob­al earn­ings and there will on­ly be a short pe­ri­od of price con­trols be­fore loss of ex­clu­siv­i­ties.”

“The IRA law is not all gloom and doom for bio­phar­ma, since it will re­duce se­niors’ out-of-pock­et Part D spend­ing and thus ben­e­fit com­pli­ance,” Leerink an­a­lysts wrote.

Drug­mak­ers, on the oth­er hand, view the law as detri­men­tal to their bot­tom line.

Bris­tol My­ers’ blood thin­ner Eliquis topped the list of Medicare Part D drugs by to­tal spend­ing in 2021. The com­pa­ny, which sued over the pro­gram, ar­gues that the leg­is­la­tion “has al­ready changed the way we look at our de­vel­op­ment pro­grams in on­col­o­gy and be­yond, whether it’s a de­ci­sion to ad­vance a new med­i­cine or pur­sue ad­di­tion­al in­di­ca­tions for an ex­ist­ing one.”

Eliquis, which was first ap­proved in 2012 to re­duce the risk of stroke and blood clots in pa­tients with atri­al fib­ril­la­tion, gen­er­at­ed $11.7 bil­lion in sales in 2022 for Bris­tol My­ers. Cather­ine Owen, se­nior VP and gen­er­al man­ag­er of US com­mer­cial, said she doesn’t an­tic­i­pate any changes to the com­pa­ny’s fi­nan­cial fore­cast as a re­sult of the drug be­ing on the list at this time.

The com­pa­ny has de­cid­ed not to take its mul­ti­ple myelo­ma can­di­date iber­do­mide in­to a reg­is­tra­tional tri­al in new­ly di­ag­nosed pa­tients “be­cause of the forced ne­go­ti­a­tions, af­ter a pe­ri­od of nine years, would not al­low us to gen­er­ate the right amount of da­ta for that spe­cif­ic prod­uct,” Owen told End­points News. 

“We are con­cerned that in the fu­ture, we will have to make dif­fer­ent de­ci­sions in our R&D pro­grams and the way we look at them,” she said.

There are “sig­nif­i­cant un­in­tend­ed con­se­quences that are not yet well un­der­stood, such as how this process may cre­ate per­verse in­cen­tives de­lay­ing launch­es, re­duc­ing sub­se­quent in­di­ca­tions, and chill­ing ev­i­dence gen­er­a­tion,” John O’Brien, pres­i­dent and CEO of the Na­tion­al Phar­ma­ceu­ti­cal Coun­cil, said in an emailed state­ment. 

The cas­es filed by phar­ma com­pa­nies are like­ly to make their way to the Supreme Court, ac­cord­ing to le­gal ex­perts, who have said fil­ing suits in dif­fer­ent dis­tricts could be a strat­e­gy to ex­pe­dite that process.