WEBVTT - Margaux Hall on Drug Pricing Negotiation 0:00:11.400 --> 0:00:14.080 Hello, and welcome to the Votes in Burdocks podcast, hosted 0:00:14.120 --> 0:00:18.000 by the policy and litigation team at Bloomberg Intelligence, the 0:00:18.079 --> 0:00:22.960 investment research platform at Bloomberg LP. This podcast a series 0:00:23.000 --> 0:00:27.280 examines the intersection of business policy and law. I'm doing Right, 0:00:27.360 --> 0:00:32.440 an analysts with Bloomberg Intelligence covering government healthcare policy, and. 0:00:32.400 --> 0:00:36.559 I'm Tishwalker, an analyst with Bloomberg Intelligence covering patent litigation 0:00:36.840 --> 0:00:38.560 in the pharma and biotech space. 0:00:39.720 --> 0:00:42.920 So our topic for today is the Inflation Reduction Act, 0:00:43.159 --> 0:00:46.520 specifically the drug pricing provisions included in the new law. 0:00:47.320 --> 0:00:49.400 And if you've been around DC long enough, you know 0:00:49.479 --> 0:00:52.800 that Medicare negotiation of drug prices has long been a 0:00:52.800 --> 0:00:55.920 policy dream for Democrats, which became a reality in twenty 0:00:55.960 --> 0:00:59.240 twenty two. Now, while the law did not go as 0:00:59.320 --> 0:01:02.400 far as many Democrats would like, it still does have 0:01:02.480 --> 0:01:06.720 implications for drug manufacturers as they now face government mandated 0:01:06.760 --> 0:01:09.080 discounts of at least twenty five percent for some of 0:01:09.120 --> 0:01:13.040 their drugs, but also as implications for future research and 0:01:13.080 --> 0:01:17.400 development and patient access to innovative new therapies. We're lucky 0:01:17.440 --> 0:01:20.640 to have Margot Hall, a partner of the Healthcare Regulatory 0:01:20.640 --> 0:01:23.120 Group at Ropes and Gray based out of Washington, d C. 0:01:24.560 --> 0:01:27.280 A graduate of Harvard Law School, Margot has a deep 0:01:27.360 --> 0:01:30.240 background in drug pricing and market access and will walk 0:01:30.280 --> 0:01:33.640 us through some of the business and policy questions relating 0:01:33.640 --> 0:01:37.240 to the Inflation Reduction Act. So with all that, Margo, 0:01:37.319 --> 0:01:39.760 welcome to the Votes and Verdicts podcasts. 0:01:40.600 --> 0:01:42.959 Thanks very much for having me, and I look forward 0:01:43.000 --> 0:01:45.760 to discussing this topic. It's certainly one that's top of 0:01:45.840 --> 0:01:47.880 mind for many of us. 0:01:48.960 --> 0:01:52.440 So let's take a step back for a second. Ropes 0:01:52.480 --> 0:01:55.360 and Gray. For people who aren't familiar, give us a 0:01:55.520 --> 0:01:57.360 bit of a background on your firm. 0:01:58.080 --> 0:02:01.480 Sure, So, we are a global law firm. We practice 0:02:01.480 --> 0:02:05.000 and have attorneys fifteen hundred or so that practice and 0:02:05.120 --> 0:02:10.200 multiple continents, multiple legal jurisdictions. As you mentioned, I'm based 0:02:10.200 --> 0:02:13.840 in the heart of where these regulatory changes unfold, in Washington, 0:02:13.919 --> 0:02:16.920 d C. In the firm's Washington, d C. Office, and so, 0:02:17.080 --> 0:02:19.560 by virtue of my location in DC, and by virtue 0:02:19.560 --> 0:02:21.280 of working in this space, I spend a lot of 0:02:21.320 --> 0:02:26.840 time looking at legislative developments and also interfacing with regulatory agencies, 0:02:27.800 --> 0:02:30.720 certain of which are under enormous stress seemingly now to 0:02:30.760 --> 0:02:34.600 implement the IRA, and. 0:02:34.520 --> 0:02:37.280 So prior to passage of the IRA, what were some 0:02:37.360 --> 0:02:42.120 of the thematic overall conversations you had with industry about 0:02:42.160 --> 0:02:44.800 some of the key policy issues in DC. 0:02:46.440 --> 0:02:49.200 So, you know, to say the least, drug pricing has 0:02:49.240 --> 0:02:53.080 been a hot topic for many years now, preceding the 0:02:53.120 --> 0:02:58.600 IRA's enactment. For several years prior to passage of the IRA, 0:02:58.880 --> 0:03:04.680 we had seen proposals legislative and regulatory for forms of 0:03:04.760 --> 0:03:08.440 government manded negotiation of drug prices and the Medicare program, 0:03:08.480 --> 0:03:12.120 and we had seen them under prior administrations. We'd actually 0:03:12.160 --> 0:03:17.040 seen them advanced on a bipartisan basis. Slight differentiation in 0:03:17.160 --> 0:03:20.720 terms of the proposals that were on the table, also 0:03:20.840 --> 0:03:25.400 differences in terms of how folks thought it would be 0:03:25.440 --> 0:03:29.320 appropriate to benchmark pricing for the Medicare program. I think 0:03:29.440 --> 0:03:33.080 one of the themes in years pre dating passage of 0:03:33.080 --> 0:03:36.680 the IRA was, you know, should we be looking outside 0:03:36.760 --> 0:03:40.360 the United States at drug prices and other jurisdictions, which, 0:03:40.880 --> 0:03:43.480 you know, fortunately, from my perspective, was not a feature 0:03:43.560 --> 0:03:46.320 that we saw ultimately in the passage of the IRA, 0:03:47.120 --> 0:03:51.120 But we had really seen whispers or perhaps even stronger 0:03:51.120 --> 0:03:54.440 than whispers of many of the concepts that ended up 0:03:54.480 --> 0:03:58.040 being memorialized in the Inflation Reduction Act as they pertain 0:03:58.120 --> 0:04:01.800 to drug pricing. So for several years there'd been discussion 0:04:01.840 --> 0:04:05.160 about having some form of a rebate back to the 0:04:05.200 --> 0:04:08.840 Medicare program if drug prices increase faster than the rate 0:04:08.840 --> 0:04:14.680 of inflation. And also patients, patient advocates and many others 0:04:14.720 --> 0:04:18.440 for years had been very concerned about the structure of 0:04:18.480 --> 0:04:24.000 the Medicare partsy benefit with patients having no cap on coverage. 0:04:24.040 --> 0:04:26.320 And so really what we ended up with in the 0:04:26.400 --> 0:04:31.119 IRA is some new, some old and repurposed and really 0:04:31.160 --> 0:04:34.200 a mixed bag from my perspective when it comes to 0:04:35.320 --> 0:04:39.040 questions of patients and accessibility and what that might look 0:04:39.160 --> 0:04:43.400 like in future years under the Medicare program. But also, 0:04:43.800 --> 0:04:46.880 you know, I think we'll probably talk here today in 0:04:47.000 --> 0:04:51.320 the commercial market segments as well, because it's very difficult 0:04:51.400 --> 0:04:56.040 to contain any the impact of any legislation of this 0:04:56.120 --> 0:04:59.640 scope in nature to simply one program like the Medicare program. 0:04:59.680 --> 0:05:03.080 And I think we're already reading the tea leaves on that. 0:05:05.520 --> 0:05:08.560 Well, thanks, that really helps set the stage for how 0:05:08.600 --> 0:05:11.280 we got to where we are today. So what are 0:05:11.320 --> 0:05:14.760 the key changes you think for life sciences companies under 0:05:14.800 --> 0:05:17.920 the IRA as it's been enacted today. 0:05:19.720 --> 0:05:23.159 So you know, from a drug pricing perspective, there are 0:05:23.279 --> 0:05:28.599 three statutory provisions that are of import and you know, 0:05:28.640 --> 0:05:31.279 I'll walk through all of them. I think the most 0:05:31.279 --> 0:05:35.200 attention has been given to the drug price Negotiation program, 0:05:35.279 --> 0:05:38.799 but the other components are really important as well because 0:05:38.800 --> 0:05:43.200 they have interconnectedness and they all have push and pull 0:05:43.279 --> 0:05:47.720 factors depending upon different stakeholders in their perspectives. So you know, 0:05:47.880 --> 0:05:51.840 first you have inflation based rebates. These are rebates that 0:05:51.880 --> 0:05:55.880 are paid back to the Medicare program if net prices 0:05:56.160 --> 0:05:59.920 increase faster than the rate of inflation. And actually those 0:06:00.000 --> 0:06:03.080 inflation based rebates are already in effect. They went into 0:06:03.080 --> 0:06:07.239 effect October of last year for Part D drugs, which 0:06:08.440 --> 0:06:11.760 are self administered drugs, the types that you would get 0:06:11.800 --> 0:06:15.560 from a local retail community pharmacy, for instance, and they 0:06:15.600 --> 0:06:18.440 went into effect January first of twenty twenty three for 0:06:18.680 --> 0:06:22.239 Part B drugs, which generally are the physician administer drugs. 0:06:22.880 --> 0:06:25.240 Notwithstanding the fact that they've gone into effect, they have 0:06:25.320 --> 0:06:30.760 not been invoiced yet. CMS has discretion to delay invoicing 0:06:30.839 --> 0:06:34.600 of those initial rebates until towards the end of twenty 0:06:34.720 --> 0:06:38.400 twenty five, so their in effect is a legal matter, 0:06:38.640 --> 0:06:42.080 but perhaps you know the market hasn't fully adjusted to 0:06:42.120 --> 0:06:46.360 them yet because folks aren't actually getting the invoices and seeing. 0:06:46.480 --> 0:06:48.920 You know how the manner in which these rebates might 0:06:49.000 --> 0:06:54.320 impact manufacturers and their pricing plans. I mean, one thing 0:06:54.360 --> 0:06:58.440 of note about those rebates is they are while they 0:06:58.480 --> 0:07:02.160 are assessed on Medicare owned only utilization, by virtue of 0:07:02.240 --> 0:07:07.560 how they are calculated, they're based on commercial pricing, and 0:07:07.640 --> 0:07:12.200 so they are likely to have an impact of depressing 0:07:13.000 --> 0:07:16.440 net price increases in general, even in the commercial market. 0:07:17.400 --> 0:07:22.160 Then second, you have this fundamental redesign and overhaul of 0:07:22.200 --> 0:07:26.200 the entire party benefit beginning in twenty twenty four and 0:07:26.240 --> 0:07:29.200 twenty twenty five. So for the first time we have 0:07:29.280 --> 0:07:32.480 a patient out of pocket cap on Medicare party drug 0:07:32.520 --> 0:07:36.600 spend at two thousand dollars. That is welcome relief to 0:07:36.720 --> 0:07:39.520 a lot of patients in the Medicare program, especially those 0:07:39.560 --> 0:07:43.800 who have had higher and limitless drug spend historically. And 0:07:43.840 --> 0:07:47.720 you have a complete restructuring of the different phases of 0:07:47.760 --> 0:07:52.080 the Part D benefit, with the coverage gap phase being eliminated, 0:07:52.280 --> 0:07:55.880 leaving a benefit that will have an initial coverage phase 0:07:55.960 --> 0:08:00.240 after the deductible's net, and then a catastrophic phase. And 0:08:00.280 --> 0:08:04.040 then in thinking through the stakeholders, you know there are 0:08:04.120 --> 0:08:08.440 four key categories of stakeholders who pay for prescription drug 0:08:08.480 --> 0:08:12.280 costs under the party program. You have patients, you have 0:08:12.360 --> 0:08:19.280 the government, plans, and pharmaceutical manufacturers. And while the split 0:08:19.360 --> 0:08:22.120 will differ for any given patient depending upon his or 0:08:22.120 --> 0:08:26.920 her drug spend on the whole, the general financial obligations 0:08:26.960 --> 0:08:32.200 for pharmaceutical manufacturers and party sponsors are likely to be 0:08:32.360 --> 0:08:38.079 increasing under this party redesign, so patients from the government 0:08:38.160 --> 0:08:42.200 on the whole should see some relief, but interesting consequences 0:08:42.240 --> 0:08:45.120 in thinking through the fact that plans and manufacturers are 0:08:45.240 --> 0:08:48.960 likely to incur more proportionally of the costs of sort 0:08:49.000 --> 0:08:53.079 of overall party drug spend. And then, last, but not least, 0:08:53.559 --> 0:08:56.720 I think we'll probably spend perhaps the most time talking 0:08:56.760 --> 0:09:00.760 about this today or the very controversial Medicare price and agiations, 0:09:00.840 --> 0:09:03.880 where for the very first time there will be a 0:09:04.160 --> 0:09:08.760 government determined so called maximum fare price and that will 0:09:08.760 --> 0:09:12.160 go into effect first in twenty twenty six for ten 0:09:12.240 --> 0:09:15.640 drugs in the Medicare Part D program and then starting 0:09:15.640 --> 0:09:18.400 in twenty twenty eight for Part B drugs as well. 0:09:19.240 --> 0:09:22.160 And it's really, you know, a negotiation program unlike anything 0:09:22.160 --> 0:09:26.600 we have seen before in the Medicare program in that 0:09:27.160 --> 0:09:29.560 even though it's referred to as really a you know, 0:09:29.640 --> 0:09:33.800 back and forth negotiation, what has become clear as we 0:09:33.880 --> 0:09:36.560 have more guidance that CMS has now released, is that 0:09:36.640 --> 0:09:39.560 it's it's really far from sort of an even handed 0:09:39.600 --> 0:09:42.560 negotiation as we might envision it generally unfolding in the 0:09:42.600 --> 0:09:46.720 commercial market. This is a form of a government mandated 0:09:46.760 --> 0:09:52.240 price control on drugs that are identified as contributing sort 0:09:52.280 --> 0:09:55.000 of as top spenders in the Medicare program. And even 0:09:55.120 --> 0:10:00.880 that selection and identification process is already very very contras So, 0:10:01.679 --> 0:10:03.760 you know, those are the three key components from a 0:10:03.800 --> 0:10:08.280 drug pricing perspective. The IRA itself, a very lengthy statute, 0:10:08.320 --> 0:10:11.000 has much much more in it pertaining to all other 0:10:11.040 --> 0:10:14.840 sorts of different industry sectors. But you know, that's that 0:10:14.960 --> 0:10:17.600 in a nutshell, those are the three key provisions that 0:10:17.640 --> 0:10:20.240 I would say are keeping me very busy and are 0:10:20.280 --> 0:10:24.200 of tremendous import for life sciences companies. 0:10:25.480 --> 0:10:28.800 And so as we think about it. It's interesting that 0:10:28.840 --> 0:10:33.160 in one sense, the cloud has been lifted in terms 0:10:33.200 --> 0:10:36.440 of the uncertainty of what kind of policy would be 0:10:36.520 --> 0:10:40.839 enacted from a drug pricing standpoint, but we don't know 0:10:40.920 --> 0:10:45.840 from an implementation standpoint how this could play out for 0:10:46.200 --> 0:10:49.880 the impacted industries. And I wanted to talk a bit 0:10:49.920 --> 0:10:53.079 about I think a side or an angle that doesn't 0:10:53.080 --> 0:10:55.880 get talked about that often or that much. It's on 0:10:55.960 --> 0:10:58.360 the generic side. And we can come back to the 0:10:58.400 --> 0:11:01.680 brand sign in a second, but you're looking at some 0:11:01.720 --> 0:11:05.640 of the data we've seen, and the FDA has has 0:11:05.720 --> 0:11:08.960 a study as well. First the market, generics can enter 0:11:09.040 --> 0:11:12.120 at a price point that's roughly a third of the 0:11:12.600 --> 0:11:16.320 brand drug. But we know that the negotiation process is 0:11:16.320 --> 0:11:19.720 going to lead to cuts for high expenditure drugs of 0:11:19.880 --> 0:11:23.440 at least twenty five percent, and there's a ceiling in 0:11:23.480 --> 0:11:27.280 the law, but there's no floor in terms of the 0:11:27.320 --> 0:11:32.920 potential pricing points pretense pricing points. So in what way 0:11:33.280 --> 0:11:36.480 does the ir RA alter some of the incentives for 0:11:37.120 --> 0:11:42.200 generics and biosimilar manufacturers when they're thinking about coming onto 0:11:42.240 --> 0:11:44.479 the market in a handful of years. 0:11:45.360 --> 0:11:47.679 Yeah, it's a really interesting question, and I think It's 0:11:47.679 --> 0:11:50.240 an example of the manner in which the statute has 0:11:50.280 --> 0:11:54.200 pushed and pull factors where it's you know, hard to 0:11:54.440 --> 0:11:59.599 predict a single clear impact on a segment of industry. 0:12:00.160 --> 0:12:00.320 You know. 0:12:00.559 --> 0:12:03.400 On the one hand, I know, there has been certain 0:12:03.440 --> 0:12:09.600 speculation that the government Medicare negotiation program could drive down 0:12:09.720 --> 0:12:13.520 prices generally on branded products right through the lower government 0:12:13.600 --> 0:12:18.400 negotiated so called maximum fair price. And I've seen related 0:12:18.400 --> 0:12:20.920 speculation that, you know, perhaps this will shrink the margin 0:12:21.040 --> 0:12:25.880 for some products, especially products with higher utilization or less 0:12:25.960 --> 0:12:28.920 utilization but higher cost on the whole. Right, greater spended 0:12:29.000 --> 0:12:33.800 Medicare might actually shrink that margin between brands and generics 0:12:34.960 --> 0:12:38.640 at the same time. So maybe maybe you know, that 0:12:38.760 --> 0:12:41.880 might be a disincentive for some companies that are thinking, well, 0:12:41.920 --> 0:12:45.559 I might want to enter the market because I expect 0:12:45.679 --> 0:12:48.840 that the key product to which I would be a 0:12:48.920 --> 0:12:54.920 therapeutic equivalent in FDA parlance, right, is going to be 0:12:55.080 --> 0:12:59.600 selected for negotiation. Now, however, there are also vectors that 0:12:59.640 --> 0:13:03.240 cut directly in the opposite direction. So under the program, 0:13:03.600 --> 0:13:08.000 in order to be selected for negotiation, you need to 0:13:08.040 --> 0:13:11.720 not only be a certain number of years post FDA approval. 0:13:11.800 --> 0:13:16.320 It's seven years for small molecule products when selected, and 0:13:16.400 --> 0:13:22.040 eleven years post BLA approval for biologics when selected. However, 0:13:22.240 --> 0:13:24.640 you also need to be a single source product, meaning 0:13:24.679 --> 0:13:27.920 that there is no generic or biosimilar on the market, 0:13:28.559 --> 0:13:32.640 and I think that may lead to earlier generic entries 0:13:32.679 --> 0:13:37.280 in the market, earlier biosimilar entries, even for those products 0:13:37.280 --> 0:13:42.040 that have residual tails on their IP exclusivity windows if 0:13:42.040 --> 0:13:45.240 they have higher utilization. I mean, I think there could 0:13:45.280 --> 0:13:49.800 be this implicit incentive within the statute to forego certain 0:13:49.880 --> 0:13:52.840 years of exclusivity. If you know, I think I'm going 0:13:52.880 --> 0:13:57.360 to be up for negotiation, and by virtue of relinquishing 0:13:57.400 --> 0:14:01.040 some of my remaining exclusivity period and getting out of 0:14:01.080 --> 0:14:03.440 the single source drug rubric, I will be able to 0:14:03.480 --> 0:14:08.199 avoid negotiation entirely. And so it's you know, interesting dynamics. 0:14:08.240 --> 0:14:11.040 I don't know from my perspective that they clearly point 0:14:11.080 --> 0:14:14.320 in one direction. And some of this also might be 0:14:14.640 --> 0:14:18.880 very therapy specific, just depending upon the nature of particular 0:14:18.960 --> 0:14:23.000 therapeutic areas, and you know, the complexity for instance and 0:14:23.080 --> 0:14:26.880 actually having biosimilars and getting you know, the requisite approvals 0:14:27.280 --> 0:14:28.280 or or whatnot. 0:14:31.560 --> 0:14:35.800 But when you think about generic entry or biosimilarity. It 0:14:35.840 --> 0:14:41.640 seems like there's some key there's a timing issue involved 0:14:41.640 --> 0:14:45.360 here where you could have a drug on the list, 0:14:45.680 --> 0:14:48.840 you could have a generic that's marketed, but then you'd 0:14:48.880 --> 0:14:55.080 also have the brand drug still have some pretty steep discounts, 0:14:55.800 --> 0:14:58.720 So you have both these drugs on the market. Is 0:14:58.720 --> 0:15:02.800 that a scenario that could play out, or like, how 0:15:02.800 --> 0:15:05.680 do you see this potentially impacting the market? 0:15:07.240 --> 0:15:11.720 Well, so, first, an authorized generic does not count as 0:15:11.720 --> 0:15:15.200 a generic or biosimilar on the market. So authorized generics 0:15:16.080 --> 0:15:19.160 have their own interesting nuances in this landscape. But if 0:15:19.160 --> 0:15:23.280 we think about true generics or biosimilars, once they enter 0:15:24.000 --> 0:15:27.280 into the market, if a product has not yet been 0:15:27.360 --> 0:15:31.680 eligible for selection for negotiation, it can lead to that 0:15:31.720 --> 0:15:35.720 product's lack of eligibility to be selected. Let's say a 0:15:35.720 --> 0:15:38.760 product's already subject to the maximum fair price, though, and 0:15:38.800 --> 0:15:45.080 then a generic comes online. Then under the statute, if 0:15:45.120 --> 0:15:48.800 a product's already subject to that maximum fair price, if 0:15:48.840 --> 0:15:52.840 the Secretary determines there's a generic or biosimilar that's being marketed, 0:15:52.920 --> 0:15:55.080 the drug is no longer going to be subject to 0:15:55.080 --> 0:15:58.240 that maximum fair price at the start of a year. 0:15:58.360 --> 0:16:01.080 That's at least nine months after that determination, right, So 0:16:01.120 --> 0:16:03.800 there's some tail, there's some lag in this determination. So 0:16:03.840 --> 0:16:05.760 I think it leads to the question of, Okay, the 0:16:05.760 --> 0:16:09.040 government has determined a maximum fair price. Let's say a 0:16:09.080 --> 0:16:13.080 product has been on the market, and let's assume that 0:16:13.160 --> 0:16:17.440 there may be some level of commercial market convergence towards 0:16:17.480 --> 0:16:20.760 that price. Notwithstanding the fact that the government determined price 0:16:20.800 --> 0:16:24.320 doesn't directly apply to the commercial market. It's published, it 0:16:24.360 --> 0:16:28.600 will be publicly known at that point if a generic 0:16:28.720 --> 0:16:33.120 comes online, Right, I'm assuming this will be a financial 0:16:33.400 --> 0:16:37.440 and broader business calculus. Right, do you anticipate that the 0:16:37.480 --> 0:16:40.000 branded price is going to go back up even if 0:16:40.040 --> 0:16:43.560 that product is no longer subject to the government negotiation period? 0:16:44.120 --> 0:16:46.640 You know, kind of how do those different pricing factors 0:16:46.720 --> 0:16:50.320 play out as you plan for a market access and 0:16:50.400 --> 0:16:54.520 competitive strategy. And I'm sure there are teams of individuals 0:16:54.600 --> 0:16:59.040 with lots of expertise beyond mine and kind of modeling 0:16:59.120 --> 0:17:01.400 that and looking at it and again probably therapy by 0:17:01.440 --> 0:17:03.920 therapy and figuring out like, is there still a viable 0:17:04.000 --> 0:17:07.800 market for both the brand and the generic in this 0:17:07.840 --> 0:17:11.399 particular place. If you've lived in a world in which 0:17:11.520 --> 0:17:14.840 IRA negotiation applied for at least some period of time. 0:17:19.359 --> 0:17:21.960 You know, I think that's really interesting, and I think 0:17:22.520 --> 0:17:25.360 sort of adding on to that, you know, one concern 0:17:25.480 --> 0:17:28.160 I know that I've heard, but I guess time will 0:17:28.200 --> 0:17:32.200 tell if this will be realized, is are we somehow 0:17:32.280 --> 0:17:35.919 disincentivizing generics to even come to the market, and what 0:17:36.040 --> 0:17:39.240 are the impacts of that in terms of you know, 0:17:39.359 --> 0:17:44.080 brand manufacturers, you know, having to continue to manufacture their 0:17:44.160 --> 0:17:46.239 drug with no generics. So I think you bring up 0:17:46.240 --> 0:17:48.520 some really interesting points and I think it'll be interesting 0:17:48.560 --> 0:17:51.080 to see, you know, how this plays out in terms 0:17:51.080 --> 0:17:55.080 of the impact on generics. But moving to regulatory strategy 0:17:55.200 --> 0:17:59.000 and life cycle considerations. So you know, as you said 0:17:59.000 --> 0:18:01.280 with you have small molecules now that are going to 0:18:01.280 --> 0:18:04.479 be eligible for the negotiated pricing after they've been on 0:18:04.520 --> 0:18:08.080 the market nine years. That price negotiation is you know, 0:18:08.320 --> 0:18:12.480 starts thirteen years after our biologics on the market. So 0:18:12.600 --> 0:18:15.520 in terms of our you know, regulatory strategy, do you 0:18:15.560 --> 0:18:19.040 anticipate seeing some sort of fundamental shift in drug development 0:18:19.119 --> 0:18:22.520 strategies that would push away from small molecules in favor 0:18:22.560 --> 0:18:24.119 of large molecules. 0:18:25.440 --> 0:18:29.240 Well, we certainly have seen some public announcements from companies 0:18:29.280 --> 0:18:32.720 in that regard right, that the IRA has slashed the 0:18:32.800 --> 0:18:36.560 value of small molecules. We've seen in public filings from 0:18:36.600 --> 0:18:42.280 certain companies them saying that there is less desire to 0:18:42.440 --> 0:18:46.159 invest in small molecule innovation. And I think we have 0:18:46.280 --> 0:18:49.040 to counterbalance that with some of the realities of the 0:18:49.240 --> 0:18:54.760 enormous complexity in bringing any products successfully to market and 0:18:54.960 --> 0:18:59.600 the fact that you know many companies that perhaps we're 0:18:59.600 --> 0:19:01.760 not backing the passage of the IRA. I mean, I 0:19:01.800 --> 0:19:03.679 confess I myself was not expecting it. 0:19:03.760 --> 0:19:03.920 Right. 0:19:03.960 --> 0:19:06.080 For years, we had seen Congress in DC not be 0:19:06.080 --> 0:19:09.320 able to get anything done and have requisite bipartisan consensus, 0:19:09.440 --> 0:19:13.680 have been largely blindsided right by the IRA, and might 0:19:13.680 --> 0:19:17.359 have already had products well into development that may be 0:19:17.440 --> 0:19:21.600 seriously impacted by this negotiation program. And so the horse 0:19:21.680 --> 0:19:24.919 might have already left the barn in those instances. And 0:19:24.960 --> 0:19:28.119 then I think you have to layer on the additional 0:19:28.160 --> 0:19:34.000 complexity that comes with receiving licensure of a biologic as 0:19:34.000 --> 0:19:37.239 compared to a small molecule. Biologics just historically have been 0:19:37.320 --> 0:19:41.840 much more difficult to develop, and so on the whole. 0:19:41.920 --> 0:19:44.119 I guess if you were starting with a clean slate, 0:19:45.080 --> 0:19:48.320 and you had both options on the table, and the 0:19:48.520 --> 0:19:53.800 expected expense of pursuing either small molecule or biologic was 0:19:53.840 --> 0:19:57.639 otherwise equal. The IRA certainly puts a thumb on the 0:19:57.720 --> 0:20:02.640 scale of biologics because of that additional for your window 0:20:02.840 --> 0:20:05.639 before a negotiated price would apply if you think you 0:20:05.920 --> 0:20:08.320 would be in a therapeutic area where you'd be subject 0:20:08.359 --> 0:20:11.359 to selection. But of course, you know, the devil's in 0:20:11.400 --> 0:20:16.159 the details with all of this, and for some therapeutic areas, 0:20:17.280 --> 0:20:20.520 the advances and write the scientific know how at this 0:20:20.600 --> 0:20:22.919 point is really in the small molecule space, and so 0:20:23.520 --> 0:20:25.639 you know, I don't know how easy it will be 0:20:26.280 --> 0:20:29.840 to pivot to biologics for some therapeutic areas. Will we 0:20:29.960 --> 0:20:34.560 potentially see the abandonment of research into additional indications on 0:20:34.680 --> 0:20:39.919 small molecule products or on biologic products. I anticipate that 0:20:40.000 --> 0:20:43.720 we will. 0:20:43.920 --> 0:20:46.240 You know, that's interesting because in some ways then you're 0:20:46.280 --> 0:20:51.240 almost missing, maybe an unintended consequence of the IRA becomes 0:20:51.280 --> 0:20:56.960 somehow missing the full potential of a therapeutic because of 0:20:57.400 --> 0:21:02.399 the way the negotiated pricing works, and so even picking 0:21:02.480 --> 0:21:05.320 up on some of the regulatory challenges and looking at 0:21:05.359 --> 0:21:08.120 the CMS guidance and you sort of hit on this 0:21:08.200 --> 0:21:10.520 before when you were talking about impact on generics, But 0:21:10.760 --> 0:21:15.280 were you surprised that CMS chose to define as a 0:21:15.359 --> 0:21:20.280 one sort of single source drug or biologic that it 0:21:20.359 --> 0:21:23.080 would include all the dosage forms and strengths with the 0:21:23.119 --> 0:21:25.879 same active moiety and ingredient if they were held by 0:21:25.880 --> 0:21:29.320 the same NDA or BLA holder, which would be then 0:21:29.400 --> 0:21:32.760 inclusive of products that could have been marketed under a 0:21:32.800 --> 0:21:38.480 different NDA or BLA. Maybe just some thoughts and comments 0:21:38.520 --> 0:21:40.119 on that guidance. 0:21:40.119 --> 0:21:44.440 Yes, I was very surprised. So that was CMS guidance 0:21:44.440 --> 0:21:47.119 that came out mid March of this past year as 0:21:47.200 --> 0:21:52.200 part of ninety one pages of subregulatory guidance, and actually 0:21:52.280 --> 0:21:55.480 certain portions of that guidance were open to public comments 0:21:55.600 --> 0:21:58.560 on a voluntary basis, and certain were not. And this 0:21:58.600 --> 0:22:01.000 happened to be one that was not open to public comment. 0:22:02.200 --> 0:22:04.600 And I was really surprised when I read that, because 0:22:04.720 --> 0:22:07.840 historically it's been very clear in the Medicare program when 0:22:07.840 --> 0:22:10.600 it comes to drugs, if you get a distinct FDA 0:22:10.720 --> 0:22:14.800 approval through an NDA or a BLA, you get your 0:22:14.880 --> 0:22:17.840 own HICCKPIX code. If you're a medicare part be physician 0:22:17.880 --> 0:22:21.960 administer drug You therefore get your own reimbursement and pricing profile. 0:22:22.040 --> 0:22:26.440 And I would say, broadly speaking, in general, HHS has 0:22:26.520 --> 0:22:31.240 deferred to FDA to make determinations regarding when a product 0:22:31.280 --> 0:22:35.359 really qualifies as being distinct and therefore having a distinctive approval. 0:22:36.160 --> 0:22:40.440 What CMS put forth, as you said in the March guidance, 0:22:40.680 --> 0:22:45.080 was that it would aggregate all products that have the 0:22:45.240 --> 0:22:48.920 same active moiety or active ingredient, even if those are 0:22:48.960 --> 0:22:53.760 subject to distinct FDA approvals, aggregate them for purposes of 0:22:53.800 --> 0:22:57.479 selecting drugs for the program. So let's say you are 0:22:57.560 --> 0:23:00.160 a company in the oncology space where this is it's 0:23:00.480 --> 0:23:03.439 fairly common for companies to actually launch first with like 0:23:03.480 --> 0:23:07.600 a smaller scale indication while they pursue additional research into 0:23:07.680 --> 0:23:11.600 potentially a broader line indication. And then let's say years later, 0:23:12.520 --> 0:23:16.440 you successfully are able to establish safety and efficacy through 0:23:16.600 --> 0:23:19.919 FDA standards for another product, even a product with a 0:23:20.000 --> 0:23:24.640 separate NDA for a broad scale indication. It would appear 0:23:24.760 --> 0:23:27.359 under the statute that what CMS is saying is you 0:23:27.440 --> 0:23:31.879 started the clock with your tiny, small, small scale indication, 0:23:32.560 --> 0:23:35.560 but we're going to aggregate all utilization if it's the 0:23:35.600 --> 0:23:40.199 same active ingredient or active moiety, such that hypothetically you 0:23:40.280 --> 0:23:45.040 might have no period of shelter from the negotiation program 0:23:45.119 --> 0:23:47.320 by the time you've launched the sort of larger broad 0:23:47.320 --> 0:23:50.840 scale indication. And I know, in my view that's not 0:23:50.960 --> 0:23:54.160 only out of line with the statute and the way 0:23:54.200 --> 0:23:58.040 I read the statute, I think it has really important 0:23:58.440 --> 0:24:02.400 and potentially harmful concept sequences for the future of clinical 0:24:02.440 --> 0:24:06.320 development and therapeutic areas and the sets of incentives around 0:24:06.320 --> 0:24:10.200 development and research, including some development and research that has 0:24:10.240 --> 0:24:13.960 been well underway for quite a few years that's potentially 0:24:14.040 --> 0:24:18.320 showing promising results. And who knows if companies might actually 0:24:18.320 --> 0:24:22.119 decide to abandon certain clinical research pursuits that could be 0:24:22.119 --> 0:24:26.879 a creative to our healthcare ecosystem based on that type 0:24:26.880 --> 0:24:32.480 of an interpretation from from CMS of the statute. So yes, 0:24:32.720 --> 0:24:37.000 I was surprised and incredibly you know, concerned when I 0:24:37.080 --> 0:24:38.480 read that in the guidance. 0:24:40.480 --> 0:24:42.520 Yeah, you know, it's interesting because I think, you know, 0:24:42.640 --> 0:24:46.080 life cycle management to me often becomes a faux pas 0:24:46.119 --> 0:24:49.119 of a word nowadays, and it's equated with from a 0:24:49.160 --> 0:24:52.480 patent perspective, sort of evergreening. But I do think part 0:24:52.520 --> 0:24:56.560 of life cycle management is looking at additional therapeutic indications 0:24:56.600 --> 0:25:00.399 and maximizing the full potential of a therapeutic. So I 0:25:00.440 --> 0:25:03.240 think you really hit on some interesting points about how 0:25:03.880 --> 0:25:07.240 maybe there could be some negative consequences here in terms of, 0:25:07.760 --> 0:25:10.800 you know, companies abandoning research that could be really helpful 0:25:10.800 --> 0:25:13.639 to patients because there's just no incentive right now for 0:25:13.720 --> 0:25:18.040 them to continue to do that. So I think with that, 0:25:18.080 --> 0:25:19.840 I'm going to pass it to Dwayne to talk a 0:25:19.880 --> 0:25:23.840 little more about commercial and patient access implications under the IRA. 0:25:26.200 --> 0:25:29.600 So as we think about and I think you mentioned 0:25:29.600 --> 0:25:34.480 this earlier about some of the broader than medicare implications 0:25:34.480 --> 0:25:38.960 for what the government's doing with truck pricing, how do 0:25:39.040 --> 0:25:41.000 you see this playing out in some of the non 0:25:41.320 --> 0:25:47.119