Pharmaceutical companies say the U.S. government ignored their advice when crafting rules for how Medicare will negotiate drug prices, and now are looking to stopgap solutions, litigation and potential legislative action to avoid the worst effects.
The Inflation Reduction Act gave Medicare the power to lower prices on certain top-selling drugs that have no competition, starting with 10 medicines in 2026. But the details of the process were left to the Department of Health and Human Services to work out, and it has since released initial guidance and a timeline that will name by Sept. 1 the first set of drugs up for negotiation.
The IRA’s drug pricing provisions have already drawn legal challenges from the U.S. Chamber of Commerce and Merck & Co., which in a lawsuit criticized the process as “extortion” rather than negotiation.
Still, the industry is bracing for the law’s effects. “I don't think we're likely to see significant change in the near term,” said Stephen Ubl, CEO of the drug lobby PhRMA, during a Wednesday panel discussion hosted by J.P. Morgan.
“You still have a president who sees this as a signature accomplishment [and] a Democratic Senate, so our focus is on laying ... the groundwork for change” by documenting what drugmakers sees as the law’s flaws, he added.
In particular, PhRMA and its pharmaceutical allies have claimed the law will shift investment away from pills and other small molecule drugs due to those products’ shorter nine-year exemption from price negotiation. Ubl said this is already drawing the attention of major cancer centers, patient groups and lawmakers on both sides of the aisle.
PhRMA, for which the IRA’s passage was a major political defeat, could still resort to litigation in its efforts to shape the law’s implementation, Ubl added.
But so far, the industry doesn’t appear to have had much luck. “It was pretty disappointing,” Eli Lilly CEO David Ricks said Wednesday about discussions with HHS. “Everything we told them [that] we thought they should do, they basically did the opposite.”
Drugmakers might have a hard time finding a sympathetic audience, particularly as the White House faces pressure from some lawmakers on the left to do even more on drug pricing. Bernie Sanders, I-Vt., this week threatened to oppose President Joe Biden’s nominee to lead the National Institutes of Health until the administration puts out a broader plan on the issue.
For now, Lilly is putting its focus on closing the four-year gap between small molecule drugs’ exemption and that of biologic drugs, Ricks said. “I think that's the fundamental defect.” (Under the law, biologic drugs would be exempt for 13 years after approval.)
Barry Greene, the CEO of psychiatric drug developer Sage Therapeutics, argued Wednesday for extending the time to negotiations for cancer drugs, so developers could have a longer window to test them and win approval in earlier lines of treatment.
Drugmakers have also complained that the law creates a disincentive to explore new uses of existing drugs. Ricks gave Lilly’s diabetes drug Jardiance as an example, noting that midway through its patent life the company worked to expand its use into treating heart failure. Under the IRA, the company would have instead started anew with a similar, but different drug to ensure a longer return, he said.
Another strategy drugmakers might pursue is aiming first for larger indications and bypassing smaller ones. For an experimental metabolic drug Lilly’s developing, Ricks said the company is “putting 100% of the powder in the cannon on day zero..”
“Essentially, the entire Phase 3 program is everything you're going to get,” he said. “And so that way, you hope for a parabolic launch curve, and maximum area under the curve before the nine years arrives.”