Commercialization

For the last quarter century, one of the world’s most capable drug developers toiled to make a new, non-addictive kind of painkiller. The journey was fittingly excruciating.

Pain, as Vertex Pharmaceuticals found out, is wildly complex. It starts simple enough, with a sliced hand or burned finger or broken bone. But it convolutes fast. Special nerve cells, activated by potentially dozens of chemicals and proteins, sense the pain and launch a signal up the spine like a firework, lighting up a patchwork of brain regions that interprets this message and decides how the body will feel.

Much about how this process unfolds in any given person remains hazy. Scientists suspect genetics, past experiences and the environment each play some role, perhaps explaining why two people who suffer the same injuries can have such dissimilar pain. This intricate web tripped up many large pharmaceutical firms, a key reason why no truly innovative medicines have come forward in more than two decades.

Vertex was one of the few to trudge ahead. Its pain labs in San Diego discovered, fine-tuned and tested promising compound after promising compound. Invariably, though, studies would show them not safe or potent enough to meet Vertex’s exacting standards. Not until about 20 years into its hunt did the company find a molecule worth championing.

In January, the Food and Drug Administration approved that molecule, now called Journavx, as a treatment for the sharp, short-lived “acute” pain usually felt after an accident or a surgery. Expectations around Journavx are high. With the U.S. still mired in an overdose crisis that’s killed hundreds of thousands of people, Vertex is positioning its medicine as a valuable alternative to opioid-based therapies.

Doctors say they’re eager to have another tool at their disposal. Wall Street views Journavx as a billion-dollar product.

Journavx has a real chance to “bend the curve on the opioid epidemic,” said Stuart Arbuckle, who, as Vertex’s chief operating officer, is overseeing the drug’s launch. “This is the first real alternative. The other is to leave these people in pain, and that's not an acceptable choice.”

Yet the true impact of Journavx will hinge on whether Vertex can contend with a healthcare system that favors the cheapest possible option — a system which, at the hands of drugmakers, insurance companies and pharmacy middlemen, was gamed for opioid use. Doctors across the country, from Oregon to West Virginia to Massachusetts, envision the biggest barrier to prescribing Journavx being insurers, as they tend to resist covering new, higher-cost pain drugs. Vertex set the medicine’s price at $31 a day, many times more expensive than generic opioids like hydrocodone.

Pain is unlike any other drug market, presenting both an opportunity and a challenge for Vertex. The least expensive therapies have ruined countless lives, and wreckage from the opioid epidemic has, for some time, prompted a shift to a layered treatment approach that tries to use these powerful drugs only as a last resort. Vertex’s mission is to convince doctors and insurers that Journavx belongs somewhere in the mix.

Arbuckle claims, as industry executives often do, that his team has had fruitful conversations with these stakeholders, that they appreciate Journavx may fill a major gap in pain management. They’ll need to for most patients to have a shot at accessing the drug.

“In some ways, talk is cheap,” Arbuckle said. “It really will depend on what we see from people in terms of action in the days and weeks following approval.”

Debating value

Supporting Vertex’s case are a pair of large clinical trials that assessed Journavx in people who underwent either a “tummy tuck” or a bunion removal, two notoriously painful surgeries. Both experiments showed the drug was significantly better than a placebo at easing pain. It also worked decently fast. Participants reported some relief within a few hours.

Unlike all other approved pain drugs, Vertex’s blocks tube-shaped proteins found almost exclusively in nerve cells located outside the brain and spinal cord. These “NaV1.8” proteins act like cell towers, transmitting pain waves to the central nervous system. In addition to being effective, studies have found Journavx to be remarkably safe. It doesn’t appear to have the addictive qualities of opioids, which bribe the brain’s pleasure centers, and compared to a placebo it actually was associated with lower rates of common ailments like nausea, constipation and headache.

Vertex took these results and asked the FDA for a broad approval in moderate-to-severe acute pain. With that now in hand, Vertex can enter the segment of the pain market where opioids are more readily prescribed. The company has also been sponsoring research to expand into different types of chronic pain.

There, Journavx has delivered mixed results. Vertex lost $15 billion in market value in December when data from a lower back pain trial disappointed investors. A year earlier, however, a study focused on the chronic nerve pain caused by diabetes showed Journavx to be about as effective as the main ingredient in Lyrica. Analysts described that performance as “solid” and “strong.”

Journavx has other limitations. The two acute pain studies explored whether it is superior to a combination of Tylenol and a commonly prescribed opioid. On that measure the drug fell short, a “glaring” outcome for Richard Vaglienti, medical director of the Center for Integrative Pain Management at West Virginia University, which treats roughly 1,600 patients a month.

Vertex rejects that this finding will be a hangup. “Go and ask physicians and patients,” Arbuckle said, “they'll tell you that's not what they're looking for.”

Vertex did just that last year, commissioning a survey of around 550 healthcare providers and 1,000 adults recently treated for acute pain. Their bigger concerns, according to the company, were the addictive potential of opioids and the exigencies of having few non-opioid options.

Taken together, Vertex’s data have left many experts with a positive view of Journavx, yet no firm agreement on precisely which scenarios it is best suited for. Vaglienti thinks it’s “possible” the drug could have a “decent role to play” managing non-severe chronic pain, and might be particularly useful for patients who can’t tolerate more potent drugs.

Kimberly Mauer, vice chair of the pain center at Oregon Health & Science University, sees it as more widely applicable. “This sounds like an exciting option, because it's going to be opioid-like, and maybe not have the side effects or the risk,” she said. “And if it doesn't work as well as opiates, I'm OK with that. Because I can maybe pair it with something else.”

While drug research and opioid mitigation strategies often focus on chronic pain, having a pill like Vertex’s in the acute setting is “extraordinarily important,” said Theodore Price, director of the Center for Advanced Pain Studies at the University of Texas at Dallas. That’s because many people are susceptible to opioid addiction but don’t realize it until they’ve been prescribed the drugs following a trauma or operation.

Tens of millions of surgeries happen annually in the U.S. And while estimates vary depending on the period studied, recent research indicates a large portion of surgery patients are still prescribed an opioid.

“There's nothing you could say that could convince me this doesn't have an impact on what happens to them later on in their life, at least some portion of them,” Price said.

Accidental overdoses involving an opioid remain high. Nearly 82,000 people in the U.S. died that way in 2022. Almost 15,000 of those deaths involved a prescription opioid. Price himself lost one of his best friends to an overdose about 15 years ago, after the friend was first exposed to opioids for pain management.

“It's a tragedy,” he said. “If we could have a drug that would help us to avoid this, it would be an absolutely massive benefit to humankind.”

The price point

Jose Zeballos understands this need well. As an anesthesiologist and leader of the acute postoperative pain management service at Brigham and Women’s Hospital, Zeballos cares for hundreds of patients every year. A few advances in treatment have emerged during his tenure, like new, longer-lasting local anesthetics, but overall “nothing else has come out that really has helped.”

Vertex’s medicine could therefore be an “amazing” addition, he said, as it may offer some relief not only after surgery, but in everyday pain management as well. Journavx might dull persistent back aches or take the edge off a sports injury. And, since opioids can confuse and disorient, it could be an especially valuable alternative for elderly patients.

Despite the many use cases, Zeballos speculates that doctors will reach for Journavx only if it’s “easily accessible,” and that depends on insurance companies stomaching the drug’s price tag. “It probably all comes down to financials more than anything else.”

Arbuckle says price and access are by far the biggest issues brought up when Vertex’s commercial team discusses Journavx. Millions of prescriptions for acute pain are written every year in the U.S., so, from the payer perspective, “if you're seen millions of anything, you're worried about the budget impact.”

Generic opioids like hydrocodone cost less than $2 a day. Advil and Tylenol are cheaper still, making Journavx’s price of $31 a day high enough to draw close examination from insurers.

Arbuckle argues that’s the wrong comparison, since it doesn’t account for the devastation opioids bring to both the healthcare system and society at large. A report from the Congressional Joint Economic Committee tried to calculate this cost and, looking just at 2020, assessed the total at nearly $1.5 trillion, one-third higher than three years prior.

“This is not an academic, side-by-side, two things have equivalent efficacy and one's cheap and the other one isn't [exercise],” Arbuckle said. “Every time a physician and patient chooses [our drug] when they would previously have chosen an opioid, that is one less opportunity that person is exposed to the potential liabilities of opioids, gets opioid use disorder and becomes a horrible statistic.”

Vertex is beholden to investors as well as patients. The price set by the company may have societal value baked in, but it’s also meant to drive revenue. One analyst expects Vertex’s pain portfolio, which includes Journavx and a series of follow-on drugs already in development, could eventually generate north of $10 billion a year.

Analysts at the investment bank Cantor Fitzgerald recently spoke to a senior director of product development at one of the nation’s largest insurers, UnitedHealth Group. The director predicted Journavx will get broad coverage, as payers are under serious pressure to cover non-opioid medications.

He also doesn’t anticipate the drug will be subject to “step therapy,” a controversial insurer practice that requires patients to “fail” on cheaper drugs before trying newer, pricier medicines.

Optum, a pharmacy benefit manager owned by UnitedHealth Group, declined to answer BioPharma Dive questions on its coverage plans for Journavx. Insurers Humana, Cigna and CVS Health did not respond to requests for comment. Vertex has talked to payers as well as parties that “paid billions of dollars for their role in the opioid epidemic,” according to Arbuckle, and the conversations have been “really positive.”

“Virtually everybody we speak to totally gets it,” he said. “Does that mean we're going to have tough negotiations on price? Of course. Do we think we’ll have to negotiate access? Of course. Do we have to go through formulary procedures? Of course. But it's not like we're getting a stiff arm from people.”

If Vertex does get payer buy-in, Journavx could be an exception to a longstanding, unwritten rule in pain management: fresh therapies take a while to reach patients. One of the company’s immediate goals is to cut down this timeline and to make sure, if patients are prescribed Journavx, they can pick it up over the counter at their local pharmacy.

At OHSU’s pain clinic, Mauer said her team rarely uses new medications within months of them coming to market, because insurers haven’t yet decided coverage plans and the out-of-pocket costs are too high for most patients. Nine times out of 10 the wait is “pretty long.”

“The problem with any new drug is the reluctance of insurance companies to pay for it because of the heavy upfront cost,” Vaglienti said. “So even though there are risks with opioids, from the insurance company side, 30 Percocet really only costs a few dollars.”

A turning tide

Journavx, then, may serve as a proving point for Vertex. The Boston-based biotechnology company has grown to an almost $115 billion valuation by selling big-ticket medicines for uncommon diseases with few to no other remedies. Pain has a trove of generic treatments and, just in the acute setting, Vertex approximates 80 million adults in the U.S. are prescribed a medicine each year.

Pricing barriers like the ones facing Journavx can be overcome, though success often takes time. Between 2018 and 2020, a novel class of injectable migraine drugs came onto a market flush with generics. While one is now approaching blockbuster status — $1 billion or more in annual sales — the others remain only modestly successful. A similar dynamic awaits a new schizophrenia treatment from Bristol Myers Squibb, which, while pegged for success, faces numerous, lower-cost competitors.

Journavx’s launch comes at what might be considered an opportune time. The reckoning over opioids still lingers in the public eye. Just last week, members of the Sackler family and Purdue Pharma agreed to pay as much as $7.4 billion in a revised legal settlement over the OxyContin maker’s role in the epidemic.

Federal and state lawmakers are also taking action. Two Congressional bills — one enacted in January, the other introduced in the Senate last year — aim to amend Medicare so older Americans can more easily access and afford a list of certain non-opioid pain medications. Journavx is eligible to join this list, though it likely won’t be added until at least 2026.

Policies like these could help “level the playing field” in the pain market, Arbuckle said, and their arrival represents a “turn in the tide.”

The executive is adamant that Vertex can make the most of this momentum. It’s been preparing for January’s approval for “a number of years now,” he said, and has amassed 150 staff to sell Journavx.

Still, there are doubts the launch will go as smoothly as Vertex — or its investors — might hope.

RBC Capital Markets analyst Brian Abrahams is braced for “limited initial adoption” and thinks the $90 million figure that other analysts have forecast for 2025 sales is “optimistic.” Paul Matteis of Stifel shares those reservations. In acute care, he said, "it's almost impossible to find a good drug launch" for anything non-lifesaving, in large part because the field "moves really slow" to adopt new treatments.

Both analysts note that, for Journavx to hit that $90 million mark, hundreds of thousands of patients would need to take the drug. "No one has a clue how to model it," Matteis said.

The medical and research communities may be holding their breath, too. Price, of the University of Texas, fears that if Vertex doesn’t make a strong enough case, it could dampen enthusiasm around Journavx or even broader pain research.

“Any medication that is effective for treating pain of any type, that doesn't have all the negative things associated with opioid therapy, would be extremely valuable,” said Vaglienti. “And I know the company is probably banking on this being one of those medications. That will remain to be seen.”

For the first time in more than two decades, a completely new form of antipsychotic medication is available in the U.S. following an approval last September by the Food and Drug Administration.

While momentous, the approval has also put a renewed spotlight on an enduring defect of the American healthcare system. An effective medicine is coming to market, but patients may have a hard time getting it at first because of insurance barriers. Analysts on Wall Street are optimistic there won't be many such hurdles, but some psychiatry specialists are cautious, citing past experience with new drugs.

The medicine, which will be sold as Cobenfy, was developed by Boston-based biotechnology company Karuna Therapeutics. In three medium- to large-sized clinical trials, Karuna showed that treatment with Cobenfy significantly relieved schizophrenia symptoms in people with the mental disorder.

Not only that, the drug didn’t cause excessive weight gain, restlessness or movement issues — side effects that are common to existing antipsychotics and, historically, have led patients to either switch medications or stop taking them altogether.

The results have been met with excitement, especially since substantial portions of the schizophrenia population don’t respond to or stay on other therapies. Yet doctors, while eager to have another treatment option, say they aren’t sure how much Cobenfy will ultimately benefit patients.

One main concern is to what extent insurance providers will cover such a drug, given the abundance of cheaper alternatives. The FDA has already approved more than a dozen antipsychotics for schizophrenia, and many have inexpensive generic versions that patients may be encouraged to try first. Cobenfy, meanwhile, carries a list price of $22,500 for a year’s supply, before accounting for insurer rebates or discounts.

A Bristol Myers spokesperson said the company priced the drug “in line with the landscape of branded oral antipsychotics.” Most patients, the spokesperson added, won’t pay the list price.

“You really have to be sure it’s better than everything else out there that’s cheaper and more readily available,” Mitzi Gonzales, a neuropsychologist and director of translational research at Cedars-Sinai, said in a 2024 interview.

Carol Lim, a psychiatrist at Massachusetts General Hospital, noted in a 2024 interview how, after approval of the schizophrenia drug Caplyta in 2019, it was hard to get insurance coverage until after other treatments failed.

Cobenfy’s rollout is being handled by Bristol Myers Squibb, which acquired Karuna for $14 billion. Bristol Myers’ Chief Commercial Officer, Adam Lenkowsky, said on an earnings call in July 2024 that payers have given “very positive feedback” to the company and acknowledged Cobenfy “fills a significant unmet need.”

Lenkowsky added that a team at Bristol Myers has, for months, been pitching Cobenfy to state Medicaid directors and Medicare payers. Estimates hold that more than 80% of schizophrenia patients are on those programs, meaning buy-in from them will be “critical,” according to Lenkowsky.

Earnings released by the company in February showed Cobenfy earned $10 million in sales during its first quarter on the market. Citing data from Clarivate, Bristol Myers estimates the U.S. schizophrenia population totals around 1.6 million.

Cobenfy’s labeling includes warnings of risks that include urinary retention, increased heart rate and swelling of the face and lips. The FDA advises against using the drug in people with moderate to severe kidney impairment, or with known liver impairment.

On Wall Street, expectations for Cobenfy are high. The investment firm Cantor Fitzgerald envisions annual sales reaching $1 billion starting in 2026. More broadly, analysts have predicted the drug will generate north of $3 billion by 2030, according to Leerink Partners.

“I think you’re going to get a massive bolus of early adopters,” Paul Matteis, an analyst at Stifel who previously covered Karuna, said prior to approval. “And I think Bristol [Myers] just has to not mess it up.”

Sales could rise higher if Cobenfy notches additional approvals, a goal Bristol Myers is already working toward. A roughly 400-person study is evaluating the drug as an add-on therapy for schizophrenia patients who aren’t adequately responding to their current atypical antipsychotics. Data from that experiment should come in 2025.

Also in 2025, Bristol Myers plans to push the drug into late-stage testing for both bipolar disorder and the agitation that often accompanies Alzheimer’s disease.

Then, in 2026, the company anticipates results from two trials of some 800 people with psychosis tied to Alzheimer’s.

Cobenfy isn’t like available antipsychotics, all of which work by balancing levels of the chemical messengers dopamine or serotonin. It instead activates “muscarinic receptors,” a type of protein researchers believe harmonizes certain brain circuits that aren’t properly functioning in schizophrenia and some other psychiatric conditions.

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Named the top trend for three consecutive years by ISPOR—The Professional Society for Health Economics and Outcomes Research, real-world evidence (RWE) is a driving force in healthcare and a critical factor in assessing the safety and effectiveness of medical devices and drugs.

But meaningful RWE is impossible without real-world data (RWD). RWD constructs a rich framework for what is happening in clinical environments and why. The better the data, the better the chance for real-time, measurable impact on both patient outcomes and profitability. RWD and RWE play a vital role in helping life sciences companies understand the value of interventions in everyday practice.

This article covers RWD/RWE use cases, the characteristics of strong healthcare data, and which data types are most significant for life sciences companies.

Data is the difference

To succeed in the race to value, life sciences companies must utilize actionable data and advanced technology to demonstrate efficacy, safety and quality outcomes. Best-in-class data and insights help differentiate medical device and drug products and ward off commoditization while enabling personalized care.

Accordingly, RWD usage is on the rise, with 90 percent of life sciences executives indicating plans for leveraging this data in decision-making across a product’s life cycle. Furthermore, one study found that 116 out of 378 FDA-approved New Drug Applications (NDA) or Biologics License Applications (BLA) incorporated RWD/RWE in the submission, with the share of approvals incorporating RWD/RWE increasing each year between 2019 and 2021. And, in 2023, the U.S. Food and Drug Administration’s (FDA) Center for Devices and Radiological Health approved the first label expansion granted to a medical device based entirely on RWE derived from device electronic health records.

RWD and the insights it delivers have the potential to improve care delivery and quality while ensuring innovations reach the right patients at the right time.

RWD/RWE can potentially help:

• Address the growing demand for data to demonstrate efficacy and safety.
• Analyze market dynamics and inform strategies to maximize future sales.
• Inform product development with data on performance and safety, ensuring high standards in diverse settings.
• Differentiate products in a “sea of sameness” competitive landscape.
• Assess therapeutic interventions not studied in randomized clinical trials (RCTs).
• Complete Total Cost of Care (TCOC) assessments.
• Support and streamline the regulatory process.
• Shorten the runway to commercialization.

In a landscape where speed is the name of the game, data is the fuel that wins the race.

All healthcare data is not created equal

Despite the rapid increase in RWD/RWE usage, questions remain about what type of data is most meaningful – and when and how RWD/RWE can inform decisions and regulatory submissions.

Let’s start here: RWE is only as good as the data from which it’s sourced. Life sciences companies need different data sources that, together, can deliver accurate, actionable information. And the right RWD is key – robust, high-quality data that fuels evidence-based and population-based analyses of drugs, devices, other treatments, disease states, epidemiology, resource utilization, healthcare economics and clinical outcomes.

Look for these characteristics in your electronic healthcare database:

• Inpatient and outpatient data
• Multiple disease types
• Chargemaster data (valuable because it identifies every device and drug used)
• Closed claims data
• EHR data including structured and unstructured data types
• Purchasing data
• Administrative billing records
• Tokenization in all major tokenization engines
• Payer-agnostic data
• HIPAA compliance

Inciting innovation: Putting data to work

To maximize the benefits of RWD/RWE, life sciences companies need broad, standardized and clean datasets, research-ready testing networks, and AI-enabled solutions for speed to value. Data science and clinical expertise are also paramount: If misused, even the most robust data will yield few relevant, timely takeaways that support research efforts, ensure regulatory compliance and inform novel medical solutions while unlocking new revenue streams.

Final thoughts

To stay ahead of today’s challenges, life sciences companies must harness the power of comprehensive datasets and strategically apply the intelligence they deliver. Doing so will not only differentiate organizations in the market – but it will also position them for long-term growth and create optimal value for the patients and communities they serve.  

Bipartisan policies in Congress meant to lower drug costs by targeting middlemen in the pharmaceutical supply chain are likely to run up against a fundamental issue: the three major pharmacy benefit managers’ chokehold on the U.S. drug market, experts said during a drug pricing transparency forum in Washington, D.C. in June. 

Influential lawmakers on both sides of the aisle have gotten behind proposals to force more transparency in the sector, delink PBM compensation from the rebates they negotiate with drugmakers, and ban PBMs from profiting off of the difference between what they charge payers and reimburse pharmacies for a drug.

But the so-called “Big Three” PBMs — CVS’ Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx — currently hold almost complete control over how patients access medications and the cost of those drugs.

Going after their business practices without changing that reality won’t help, experts said Wednesday during the Transparency is Rising event hosted by a coalition of small upstart PBMs.

“The solution to this can’t be just to ban existing practices. It has to be to remove the choke points that people have over particular parts of the supply chain,” said Reed Showalter, a former advisor on competition to the White House during the Biden administration and attorney with the Federal Trade Commission.

The PBM ‘pivot’ problem

Caremark, Express Scripts and Optum Rx jointly control 80% of U.S. prescriptions. The companies are all subsidiaries of massive healthcare corporations that also own a major national health insurer and pharmacy business, giving them the ability to influence multiple stages of a drug’s journey from a manufacturer to a patient — and a significant profit motivation to do so, according to experts.

Caremark, Express Scripts and Optum Rx say they use their market power to drive down drug prices for their payer clients and the members they serve.

But that power also allows the Big Three to sidestep past efforts from Washington and the states to affect their business model, Antonio Ciaccia, the president of consultancy 3 Axis Advisors, said.

Ciaccia cited an example from the state of Ohio, which banned spread pricing in its Medicaid program in 2018 after discovering it overpaid PBMs by nearly $225 million in one year due to the practice.

But Ohio didn’t end up saving any money, because the PBMs began paying pharmacies beyond the contractually agreed price and clawing back the difference after the fact, he said.

“What we’re talking about is essentially this: the nimbleness of the industry to pivot around policy reforms,” Ciaccia said.

Instead of targeting specific business practices, Congress and antitrust regulators should instead prioritize weakening the Big Three’s control by reversing years of unchecked integration that have allowed PBMs to find these opportunities for arbitrage, speakers said.

“I’m skeptical when you don’t touch the underlying power of the Big Three PBMs, when they still cover 100 million lives each, when they still have influence over formularies, they’re going to find new avenues to pad their profits,” said Alejandro Molina, a policy advisor for the White House during the Biden administration.

Washington could follow Arkansas’ lead, Molina suggested. In April, the state passed a law preventing PBMs from owning pharmacies in a bid to protect independent pharmacies.

The law, which would force companies like CVS that own both PBMs and pharmacies to divest one or the other, was quickly met with criticism and legal challenges from the PBM industry.

Still, bills with similar provisions were recently introduced in Vermont, Texas and New York, according to the National Community Pharmacists Association.

Some federal lawmakers also support breaking up PBMs. In December, a bipartisan group of legislators introduced a bill that would force PBMs to sell their pharmacy businesses.

There’s a unique window for concrete reform now, given Congress’ attention on the issue and interest from the FTC and the Department of Justice in cracking down on some of the Big Three’s most egregious actions, speakers said.

The FTC, for example, is currently suing Caremark, Express Scripts and Optum Rx for allegedly inflating the cost of insulin, while the DOJ is reportedly investigating UnitedHealth over a variety of antitrust concerns.

“I think there’s a lot of opportunities,” said Charlie Katebi, the deputy director for health at the conservative America First Policy Institute. “There are so many issues where Republicans and Democrats — on many important issues — see things with totally different realities. That is not the case right now.”

Meaningful PBM reform at the federal level is unlikely in the near term. The House included a handful of PBM policies in the GOP reconciliation megabill currently being hammered out on the Hill, but the Senate stripped them out in its version earlier in June

That doesn’t mean the Senate isn’t on board, Conor Sheehey, a director at Leavitt Partners, said.

It’s just more likely that legislators will work to pass PBM reform in appropriations legislation closer to the end of this year, where healthcare policies are normally enacted, according to Sheehey, who previously worked as a senior health policy advisor to Sen. Mike Crapo, R-Id., the chair of the Senate Finance Committee.

Tackling rebates, transparency

Some policies being thrown around in Washington have merit even if they don’t break up the oliogopy enjoyed by the Big Three PBMs, according to the panelists. For example, the Trump administration has signaled interest in reforming rebates that PBMs negotiate with pharmaceutical companies in exchange for including their drugs on plan formularies.

During the first Trump administration, regulators attempted to require PBMs and insurers to pass through all rebates in Medicare’s prescription drug benefit to patients, but that rule has yet to be implemented.

PBMs should voluntarily find ways to move away from the rebate “kickback” system, lest the federal government do it for them, CMS Administrator Dr. Mehmet Oz said Tuesday, also speaking at the Transparency is Rising event.

Going after rebates won’t solve systemic issues with the market for prescription drugs, experts cautioned. The Big Three say they already pass through the vast majority, if not all, of those savings through to their clients.

And reabtes no longer make up the majority of PBM profits, according to research. Instead, manufacturer fees and specialty pharmacy dispensing are making up more and more of PBMs’ bottom lines.

“As long as the Big Three PBMs have the covered lives of their insured parents they are going to find a way to influence formularies, reimbursements, networks in whatever configuration they want,” Molina said. ”I just feel like we are 10 years behind, and that PBMs are already creating new corporate structures, new revenue sources that we’re going to have to regulate in 10 years. So until we tackle the upstream power of insurers and the Big Three PBMs and vertical integration, we’re not really solving any structural issues.”

But transitioning away from a compensation stream directly tied to drug prices may be good in the long run, given the rebating system continues to function in perverse ways, according to Sheehey.

For example, when one corporate parent owns both the PBM and the payer, they do get to retain profit from rebates even if their PBM is ostensibly passing it through.

“This is no disrespect to CVS Health, but when they’re like, ‘Oh, look, Caremark’s not getting a really fat portion of that rebate revenue.’ But then their parent company is? This is a company that has one ticker on all the markets,” Sheehey said.

In the absence of a top-down overhaul, PBM transparency reform to shine more light on contracting practices, pharmacy fees and other financial arrangements is a good starting point to make the market and policymakers more informed, panelists said.

That’s something the CMS is moving toward as well, with Oz saying the agency could issue rules forcing payers to share more information on their drug transactions as soon as this year.

But as Washington appears poised to step into the fray, it’s imperative lawmakers and regulators think about the root problem to avoid creating new ones, according to the panelists. For example, experts said regulatory scrutiny is one reason why major PBMs have spun off affiliated companies like rebate aggregators that live offshore, adding more complexity into the prescription drug supply chain.

“We need to realign incentives more structurally, and in any efforts to change transparency we need to be very careful that we are not basically emboldening the next layer of opacity, because the unfairness hides in the opacity of the system,” said Showalter.

Medicare’s next drug price negotiations will treat Novo Nordisk’s semaglutide as a single product, regardless of whether the metabolic disease medicine is used to treat diabetes or heart risk, and whether it is delivered by shot or pill.

Semaglutide was one of 15 drugs the Centers for Medicare and Medicaid Services selected in January for a second round of price talks set up by the Inflation Reduction Act. Besides semaglutide, which Novo Nordisk sells as Ozempic, Rybelsus and Wegovy, the agency also chose other diabetes drugs, respiratory therapies and several cancer treatments.

CMS’ treatment of semaglutide as one product is because the agency focuses on a drug’s “active moiety,” or the core compound that has a biological effect, rather than treat each use approved by the Food and Drug Administration separately.

“The statute and our guidance [are] very clear that when a drug is selected for negotiation, all dosage forms and strengths with the same active ingredients are included, even if they are sold under different formulations or brand names,” said Erin Richardson, CMS’ former chief of staff, on a call with reporters.

Ozempic was approved in 2017, making semaglutide subject to negotiation for the first time in 2025 under rules laid out in the Inflation Reduction Act. Eli Lilly’s competing products Mounjaro and Zepbound, which contain the active ingredient tirzepatide, gained first approval in 2022, meaning they wouldn’t be subject to price negotiation until 2030.

While semaglutide is widely covered within Medicare for diabetes, the health insurance program is not currently permitted by law to reimburse for treating weight loss, where Novo has since 2021 sold semaglutide as Wegovy.

Wegovy is also approved to lower cardiovascular risk in people with heart disease and who are either overweight or have obesity, however. Medicare determined last March that this use could be covered under Part D plans. And the Biden administration last fall proposed a new rule permitting Medicare to cover obesity treatment more broadly.

The “maximum fair price” the U.S. government negotiates under these talks will be a single cost. Dosage strengths, formulations and packaging prices for Ozempic, Rybelsus and Wegovy would be adjusted to meet that monthly price.

Semaglutide products in Medicare are also already likely to be discounted from their list prices — $998 a month for Ozempic and Rybelsus, $1,349 a month for Wegovy — although CMS officials wouldn’t confirm that Part D insurance plans receive rebates. In 2023, Novo paid 62% of its gross sales back in rebates across its sales. Of roughly $88.3 billion in gross sales, about $32 billion was paid back in rebates to Medicare and U.S. managed care plans.

“We remain committed to working with policymakers to advance solutions to ensure access and affordability for all patients,” a Novo spokesperson said in an emailed statement. “That is why we are deeply concerned about the price-setting process, which could negatively impact patients’ ability to access their medicines and threatens to stifle future scientific development of life-changing medicines for chronic diseases in which there is a real unmet need.”

Negotiations over semaglutide will be Novo’s second time discussing price concessions with CMS. The first round of talks, which yielded prices set to take effect in 2026, included insulin aspart, which Novo sells as several different products.

That selection triggered a lawsuit from Novo, citing CMS inclusion of multiple products by way of selecting one active ingredient.

That suit could provide an opportunity, albeit a long shot, to exempt Wegovy and Rybelsus from this round of price negotiations. CMS in its guidance said it applies price negotiations across products using the same active ingredient or moiety because it reduces the incentive for companies to engage in “product hopping,” or making small changes in drug formulation to extend patent-protected exclusivity.

Novo claimed the guidance went beyond what the IRA allowed because it interpreted the law’s call for price negotiations on “drug products” and “biological products” to mean all those with the same active moiety or ingredient. By grouping together all of Novo’s insulin products, CMS invoked negotiations on more than the 10 products permitted by the IRA in the initial round, Novo argued.

The courts so far have rejected Novo’s lawsuit, ruling in July the company was effectively suing on behalf of other manufacturers when it made that claim, which it doesn’t have standing to do. Novo has appealed.

Whether CMS will be able to carry out its plans — and even whether the program will survive a Trump administration and Republican Congress seeking to undo the work of the Biden administration — is subject to some question. Already, drugmakers are lobbying the Trump administration to change the Inflation Reduction Act.

On the January call with reporters, CMS officials emphasized their selections were guided by the Inflation Reduction act, noting that any other team that followed statute would end up choosing the same slate of 15 medicines.

Semaglutide, the popular drug sold by Novo Nordisk as Ozempic for diabetes and Wegovy for weight loss, was among a group of widely used medicines selected by the U.S. government for the next round of price negotiations under a 2022 law aimed at curtailing pharmaceutical costs within Medicare.

The Biden administration released the list of 15 drugs Jan. 17 in one of its final acts of healthcare policy before President-elect Donald Trump took office on Jan. 20.

Publication of the list kicks off a monthslong process that will feature a series of meetings between drugmakers and the Centers for Medicare and Medicaid Services, which oversees the Medicare insurance program. The negotiations, which drugmakers have opposed vociferously, will yield “maximum fair prices” that take effect in 2027.

Also on the list are Xtandi, Ibrance, Calquence and Pomalyst, blockbuster drugs for cancers of the prostate, breast, blood and bone marrow. Trelegy Ellipta, an inhaler used for asthma and chronic obstructive sleep apnea, is included, as are Otezla, a psoriasis medicine, and Vraylar, an antipsychotic.

Ozempic and Wegovy are particularly significant inclusions. Their use in the U.S. has skyrocketed due to the potency of semaglutide, which is the active ingredient of both, in helping control diabetes and shed weight.

Currently, Medicare is barred from covering drugs solely for weight loss. Wegovy is also approved to lower cardiovascular risk in people with heart disease who are either overweight of who have obesity, however. And last November the Biden administration proposed a rule that would eliminate that restriction and permit Medicare coverage of obesity treatment.

Some 5.25 million people covered by Medicare took one of the 15 selected medicines between November 2023 and October 2024, according to information provided by CMS. Over that period, gross spending by Medicare on those products totaled $41 billion, or about 14% of total prescription drug costs under the program’s “Part D” benefit.

“The U.S. has the most innovative treatments in the world,” said former CMS administrator Chiquita Brooks-LaSure on a January call with reporters. “But that’s only meaningful if people can actually access them.”

Medicare’s power to negotiate drug prices in this fashion is newly granted by the Inflation Reduction Act, which Congress passed two years ago in a significant defeat for the pharma industry.

For the first time, the law allows Medicare to use its scale and market power to extract price concessions from drug companies on certain, select medicines. Only “single-source” branded drugs that lack generic competition and are among the 50 products with the highest spending in Medicare Part D can be picked. Part B drugs, which include medicines administered by physicians, are exempt from the first two cycles of negotiations.

The Inflation Reduction Act also specifies that selected drugs must have been on the market in the U.S. for either seven or 11 years depending on whether they are small molecules or biologics, respectively.

CMS chose 10 drugs for the first round, which concluded last summer with the publication of the discounted prices government negotiators extracted from companies. According to the agency, the new prices were on average 38% to 79% lower than the drugs’ list price, or wholesale acquisition cost.

Assessing savings from those efforts is complicated, however. Health plan sponsors that contract with the government to administer Part D benefits already secure drugmaker rebates that can result in lower net prices. Those net prices are not public, so it’s hard to precisely compare the negotiated prices on the first 10 drugs, which take effect in 2026, to what Medicare paid previously.

For this second round, CMS tweaked the rules guiding negotiations, allowing for more meetings with drugmakers and greater input from patients and physicians.

The pharma industry has lambasted the process as essentially price-setting, rather than a true negotiation, because the Inflation Reduction Act gives CMS the power to levy exceptionally steep fines if drugmakers don’t accept the offered “maximum fair price.”

During the first round of negotiations, CMS said it revised its initial offers upwards over the course of meeting with drugmakers. For five of the 10 drugs, the agency reached an agreement with the respective drugmaker as a result of a negotiation meeting. For the other five, the relevant company accepted CMS’ final written offer, per a fact sheet published in August.

Drugmakers have also argued the Inflation Reduction Act’s different treatment of small molecules and biologics is skewing R&D incentives away from the former type of medicine, which is often made in convenient oral doses.

A handful of pharma companies have sued to block the law on various grounds, including its constitutionality, but have so far been unsuccessful. In mid-January, generic drugmaker Teva Pharmaceutical joined in, filing a suit in U.S. district court that challenges how CMS has interpreted the law.

While Trump may not seek to repeal the Inflation Reduction Act wholesale, it’s uncertain how aggressively his administration will handle the negotiations, which will take place between now and November 2025 for this second round. Pharma companies are unpopular in the U.S., and the law gives Trump an opportunity to take credit for bringing down drug prices.

On the January call with reporters, Brooks-LaSure emphasized how CMS’ actions were taken in accordance with statute. “The law is clear and straightforward in how it specifies the criteria for how the drugs are selected for negotiation,” Brooks-LaSure said. “CMS followed the law’s criteria, and that is how we determined the 15 drugs for selection.”

Novo Nordisk will work with some of the telehealth companies that sold knock-off versions of obesity drugs like its popular medicine Wegovy, announcing in April deals with Hims & Hers, LifeMD and Ro to sell branded Wegovy distributed through the Danish drugmaker’s direct-to-consumer pharmacy.

The announcement comes days after a federal court in Texas rejected a legal challenge by compounding pharmacies to the Food and Drug Administration’s recent determination that Wegovy was no longer in shortage. As long as semaglutide, the active ingredient in Wegovy and the diabetes drug Ozempic, remained in short supply, compounding pharmacies could manufacture and distribute copycat versions.

The telehealth companies will be able to sell Wegovy distributed through the NovoCare Pharmacy — which the drugmaker started in March — to people who are prescribed the obesity shot but don’t use insurance to cover the cost. Two of the telehealth companies, LifeMD and Ro, will sell Wegovy at the same $499 price as NovoCare, while Hims will offer it at $599 per month.

“We believe patients living with this chronic disease who want and need treatment under the care of a licensed healthcare professional, including those embracing the growing telehealth community, deserve to get the real thing," said Dave Moore, Novo’s head of U.S. operations, in a statement.

The deals come as Novo is facing a growing threat to its $8.4 billion obesity blockbuster from Eli Lilly, which was first to establish its own direct-to-consumer channel for obesity drugs. Lilly’s rival drug, Zepbound, proved in testing that it could help people with obesity lose more weight than Wegovy, which some analysts think should give it an edge in marketing.

Novo’s deal with the telehealth companies could expand Wegovy’s reach among people paying out of pocket, following Lilly’s similar deals with LifeMD and Ro. Wegovy still retains some advantages, however, including being the only obesity drug shown to prevent cardiovascular complications and death, which has opened the door to limited Medicare coverage.

Moreover, the race is on to launch an oral obesity drug. Novo recently said it has asked the FDA to approve an oral version of semaglutide that completed pivotal trials in obesity. Lilly is close behind, with a pill that may be easier to manufacture. That could give Lilly an edge as both companies have struggled to expand manufacturing to keep up with patient demand, a factor that had led to the shortages.

Novo Nordisk in June terminated a marketing deal for its obesity drug Wegovy with Hims & Hers Health just eight weeks after it began, claiming the telehealth company “has failed to adhere to the law which prohibits mass sales of compounded drugs.”

Hims had marketed compounded Wegovy under laws that permit it to while a drug is in shortage, but the U.S. government said the shortage ended in February. The Danish drugmaker partnered with Hims and other telehealth companies to help its customers transition to branded Wegovy.

Novo said it is taking the action to protect patients from “knock-off drugs made with foreign illicit active pharmaceutical ingredients” that Hims justified under the “false guise of ‘personalization.’” In response, Hims CEO Andrew Dudum said Novo was “misleading the public.”

Novo and rival Eli Lilly struggled to meet demand for their obesity drugs following their respective launches, forcing them to spend hundreds of millions of dollars to expand manufacturing of the complex, injectable peptide drugs. Besides adding factory capacity, Novo’s controlling shareholder purchased the contract manufacturing company Catalent for $16.5 billion and sold three of its factories to Novo Nordisk.

While the drugs were officially in shortage — as declared by the Food and Drug Administration — companies like Hims were permitted under federal law to provide copycat versions of Wegovy and Zepbound manufactured at compounding facilities.

This fueled the growth of Hims and other telehealth companies, which were able to provide them in direct-to-consumer channels as well as better accommodate cash-pay patients who can’t get obesity drug coverage through employers. Some analysts believe cash-pay patients will constitute a much bigger share of the obesity drug market than other types of drugs.

With the end of the shortage, both Novo and Lilly sought to provide similar types of services through pharmacies and other types of consumer-facing companies, which also included cash-pay options and lower prices for people who paid cash. Lilly initially used online pharmacies like Eversana and Truepill, while Novo partnered with the telehealth companies, including LifeMD and Ro in addition to Hims. Lilly later signed deals with Ro, Teladoc and LifeMD.

In a recent presentation at an investor conference, Lilly finance chief Lucas Montacre said some compounders had continued to combine the active ingredients of FDA-approved obesity drugs with other molecules or vitamins and called them personalized treatments.

“We are enforcing in those agreements that, as long as the product is out of the shortage list, those telehealth services are not compounding either [Zepbound] or [Wegovy],” Montacre said of its deals.

Hims said the deal ended because it was defending the “ability of providers and patients to control individual treatment decisions.”

“In recent weeks, Novo Nordisk’s commercial team increasingly pressured us to control clinical standards and steer patients to Wegovy regardless of whether it was clinically best for patients. We refuse to be strong-armed by any pharmaceutical company’s anticompetitive demands,” Dudum wrote in a post on X.