Jannah Theme License is not validated, Go to the theme options page to validate the license, You need a single license for each domain name.

Medicare drug pricing negotiations may have limited impact on drugmakers

In this photo illustration, Eliquis is made available to customers at New City Halsted Pharmacy on August 29, 2023 in Chicago, Illinois.

Scott Olson | Getty Images

Medicare is set to negotiate the prices of 10 different drugs with manufacturers in an effort to make these expensive treatments more affordable for older Americans — a process the pharmaceutical industry is fiercely opposed to.

But analysts say drug pricing negotiations are likely to have limited financial impact on manufacturers, at least for this first round of prescription drugs.

Indeed, other factors are already expected to weigh on the revenues and profits of drugs on the list, which could minimize any negative impact from lower negotiated prices. For example, many drugs are already facing strong competition from other brand name drugs or expiring patents in the coming years, which will open the market to generic alternatives.

More generally, some of the drugs on the list do not contribute significantly to their business operations.

“The commercial impact of the negotiations appears limited in the near term for this first list of drugs,” Mara Goldstein, managing director of Mizuho Securities, told CNBC.

That could change in future rounds of negotiations, analysts say.

The Biden administration unveiled the long-awaited list of drugs on Tuesday, officially kicking off a lengthy negotiation process that will conclude in August 2024. The reduced prices will not take effect until January 2026.

The list includes drugs with the highest expenses for Medicare Part D, which covers prescription drugs, from June 2022 through May 2023. This includes blood thinners from Bristol Myers Squibb And Johnson & Johnsonand diabetes medications Merck And Astra Zeneca.

However, negotiated prices may never come into effect. Several drugmakers, including a handful whose drugs are on the list, have filed lawsuits in various federal courts in an attempt to end the negotiations. This could lead to split decisions on appeal and expedite the dispute all the way to the Supreme Court.

Meanwhile, the US Chamber of Commerce, one of the nation’s largest lobby groups, is seeking a preliminary injunction to suspend negotiations by October 1. It is the same day that drugmakers must sign agreements to participate in negotiations. It is not known if this effort will be successful.

Patent expirations, trademark competition

New prices negotiated in 2026 could have minimal financial impact on drugs whose revenues and profits are already expected to decline due to upcoming patent expirations and brand competition.

For example, Januvia, Merck’s type 2 diabetes drug, could lose exclusivity in mid-2026, just months after negotiated pricing takes effect. Goldstein said she expects to see 90% of Januvia’s volume go to cheaper generic competitors in the first few months after patent expiration.

Drugs on Medicare’s list this year

  • Eliquis, made by Bristol-Myers Squibb, is used to prevent blood clotting and reduce the risk of stroke.
  • Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar in people with type 2 diabetes.
  • Xarelto, made by Johnson & Johnson, is used to prevent blood clotting and reduce the risk of stroke.
  • Januvia, made by Merck, is used to lower blood sugar in people with type 2 diabetes.
  • Farxiga, made by AstraZeneca, is used to treat type 2 diabetes.
  • Entresto, made by Novartis, is used to treat certain types of heart failure.
  • Enbrel, made by Amgen, is used to treat rheumatoid arthritis.
  • Imbruvica, made by AbbVie, is used to treat different types of blood cancers.
  • Stelara, made by Janssen, is used to treat Crohn’s disease.
  • Fiasp and NovoLog, insulins manufactured by Novo Nordisk

“So negotiating today for Januvia seems like a moot point since it will lose its exclusivity in 2026 and see that decline due to generic competition,” she told CNBC.

The same goes for Farxiga, AstraZeneca’s type 2 diabetes drug, which will lose its exclusivity in 2026, and other drugs on the list whose patents will expire later, according to a note from David Risinger. analyst at Leerink Partners.

Xarelto, a blood thinner from Johnson & Johnson, and Entresto, a heart failure drug from Novartis, are both set to lose their exclusivity in 2027. This means the companies may only feel the impact of negotiated prices for their drugs during about a year before generic competition minimized the effect, Risinger wrote.

Eliquis, a blood thinner from Bristol-Myers Squibb and Pfizeris slightly more exposed to the impact of negotiated prices since its patent expires in 2028. But this risk will probably be manageable.

“We believe Bristol/Pfizer could see their respective 2026 revenue decline in the mid-single digits… due to negotiations with Eliquis,” Bank of America analyst Geoff Meacham said in a research note. Tuesday, adding that the effect of negotiated prices will be limited to 2026 and 2027.

Brand competition is another factor that could mitigate the impact of negotiated prices, Meacham added.

For example, AbbVieImbruvica, the blood cancer drug, could see steep declines before its negotiated price takes effect in 2026, largely due to “competitive erosion” from similar treatments like Calquence and AstraZeneca. beigeIt’s Brukinsa, according to Meacham.

Competition between similar brand name drugs has already resulted in rebates and reductions being paid to Medicare Part D for some of the drugs on the list. This raises questions about the lower price Medicare can negotiate.

Louise Chen, an analyst at Cantor Fitzgerald, also pointed out that many of the drugs on the list are not primary growth drivers for their companies in the first place. This means that any drop in drug sales and profits will have little effect on the company’s overall business and inventory.

For example, Merck’s Januvia contributes less to revenue and profits than the company’s other drugs in development, such as its blockbuster cancer drug Keytruda or HPV vaccine Gardasil. Januvia generated $4.5 billion in revenue last year, while Keytruda raked in $21 billion.

The next negotiations could be different

But Chen said that could change in 2028 and beyond, when negotiations begin to target Medicare Part B drugs as well.

Part B covers more specialized drugs administered by doctors or other healthcare providers rather than pharmacies. This includes Keytruda and other biological medicines, created from living cells or organisms.

“When we get to more organic products, the impact will be much bigger because these products are much more expensive and have a much bigger impact on the profits and growth of these companies,” Chen said.

Mizuho’s Goldstein also added that drug pricing negotiations are likely to have a longer-term impact on companies, though they “certainly seem muted right now.”

Over time, negotiations could alter a company’s drug development strategy.

Negotiated pricing prevents companies from retaining pricing power over a treatment, so “the thought process is that continuing to reinvest in a drug to add additional indications has a less compelling return,” according to Goldstein. Indication expansion refers to the use of a drug to treat a different disease.

cnbc-health care

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.

Back to top button