Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the policy and litigation team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. This podcast series focuses
Speaker 1: on the intersection of business policy and law. I'm Tishwalker
Speaker 1: and analyst with Bloomberg Intelligence covering healthcare patent litigation, and.
Speaker 2: I'm Doing Right, analyst with Bloomberg Intelligence covering government healthcare policy.
Speaker 1: Our topic for today is the Inflation Reduction Act, a
Speaker 1: part two of sorts, following a conversation we had in
Speaker 1: May with Ropes and Gray partner Margot Hall, where we
Speaker 1: discussed the impact of the law on R and D
Speaker 1: and regulatory strategy, among other topics. In the lead up
Speaker 1: to September first, the date by which we will see
Speaker 1: the first list of drugs to be negotiated under this
Speaker 1: new law. There's been a lot of focus on how
Speaker 1: the IRA will impact some of the high expenditure branded
Speaker 1: drugs and biologics, but less attention on how this new
Speaker 1: law could impact generic and biosimilar manufacturers, which we plan
Speaker 1: to tease out today. But before we dive into the details,
Speaker 1: I want to set the stage with a quick high
Speaker 1: level overview of the relevant parts of the law that
Speaker 1: we'll discuss today. It sets in place Medicare price cuts
Speaker 1: of at least twenty five percent for high expenditure drugs
Speaker 1: and biologics for which there is no marketed, generic, or biosimilar.
Speaker 1: It also shifts the Part D program's financial responsibility for
Speaker 1: drug coverage from Medicare and beneficiaries to drug manufacturers and
Speaker 1: health plans.
Speaker 2: And so to discuss these important issues, we have Craig Burton,
Speaker 2: Executive director of the Biosimilars Council and senior vice president
Speaker 2: at the Association for Accessible Medicines, which represents generic and
Speaker 2: biosimilar manufacturers. Craig has a long history and healthcare policy
Speaker 2: circle with private sector experience that includes strategy, health policy solutions,
Speaker 2: malancrost pharmaceuticals, and public sector experience as Deputies Assistant Secretary
Speaker 2: for Legislation at HHS and policy advisor for then Senate
Speaker 2: Majority Leader Bill Frist. So with all that, Greg, welcome
Speaker 2: to the votes in Verdicts Podcasts.
Speaker 3: Thank you guys for having me.
Speaker 2: So, Craig. For those who aren't in the Washington DC bubble,
Speaker 2: can you give us some background on the Association for
Speaker 2: Accessible Medicines.
Speaker 3: Yeah, I'd be happy to So. AM is a trade
Speaker 3: association representing manufacturers of generic and bisimilar medicines. Our work
Speaker 3: really is focused on expanding patient access to safe, quality,
Speaker 3: and effective generics and biosimilars. We do that by promoting
Speaker 3: a positive regulatory reimbursement policy environment. In addition, the Biosimilars Council,
Speaker 3: which is a part of AM, is focused specifically on biosimilars,
Speaker 3: advancing policy reimbursement solutions to encourage bisimilar adoption, as well
Speaker 3: as encouraging education and collaboration around the safety and effectiveness
Speaker 3: of biosimilar medicine.
Speaker 2: And so, when we think about the role of generics
Speaker 2: and biosimilars in the marketplace, what can we say about
Speaker 2: the cost savings for individuals, employers, and other players.
Speaker 3: Yeah, the cost savings are really significant. A couples stats
Speaker 3: that will throw out for you. If you look at
Speaker 3: our website, which is accessible meds dot org, you'll see
Speaker 3: that we publish an annual savings report looking at the
Speaker 3: impact of generic and biosimilars. Where I actually working on
Speaker 3: that right now on the most recent report that we
Speaker 3: hoped to publish later this summer. But if we look
Speaker 3: at twenty twenty one. For instance, using last year's report,
Speaker 3: in twenty twenty one, the use of generics and bisimilars
Speaker 3: saved three hundred and seventy three billion dollars compared to
Speaker 3: what would have been spent if generics and bisimilars were
Speaker 3: not on the market. Over the last ten years, the
Speaker 3: use of generics and bisimilars has resulted in the savings
Speaker 3: of more than two point six trillion dollars. So savings
Speaker 3: from generics and bisimilars is critical to the sustainability of
Speaker 3: healthcare and the affordability of healthcare in the US. To
Speaker 3: put it in another way, if we look at total
Speaker 3: spending on prescription drugs, generics and biosimilars it for ninety
Speaker 3: one percent, So more than nine out of every ten
Speaker 3: prescriptions were filled with a generic or bisimilar, but they
Speaker 3: were responsible for only eighteen percent of all spending on
Speaker 3: prescription drugs in the US. So high value to everyone,
Speaker 3: whether it's patients, employers, taxpayers, and payers alike.
Speaker 2: And who are the players that help derive some of
Speaker 2: those savings and access to generics and buy similars. What
Speaker 2: are the roles of physicians and PBMs and retail pharmacies
Speaker 2: in this healthcare supply chain is related to these products.
Speaker 3: Yes, I would say that everyone really has a role
Speaker 3: in creating those savings. And for years, generics have driven
Speaker 3: those savings as a result of a system wide alignement
Speaker 3: in terms of coverage and reimbursement that encourages their use.
Speaker 3: Put simply, historically, everyone uh wins when when a patient
Speaker 3: uses a generic because they've been more valuable to pharmacies,
Speaker 3: to providers, and to health plans and PBMs. And when
Speaker 3: you when you factored this along with state policies that
Speaker 3: require dispensing of generics when available, that's that's where you
Speaker 3: really get the magic of creating patient access and savings.
Speaker 3: What I would say is this incentive is weakening, and
Speaker 3: I think this is a result of changes in the
Speaker 3: marketplace as well as changes in the policy and coverage
Speaker 3: environment that unintentionally can can encourage the use of a
Speaker 3: higher cost medicine, of a higher cost brand drug.
Speaker 2: And so thinking about that, do you think that's playing
Speaker 2: a part in what we're seeing right now in the
Speaker 2: generic drug market. We heard recently that of Pharmaceuticals is
Speaker 2: scaling back its generic business. There was a notable bankruptcy
Speaker 2: filing impacting a drug on the FDA's drug shortage list.
Speaker 2: Does this signal challenges for the industry as a whole
Speaker 2: or is this a function of over supply in some
Speaker 2: cases or just broader dynamics playing out right now?
Speaker 3: Yeah? Absolutely, I think what you're seeing now is the
Speaker 3: result of years of shortsighted policy and market changes that
Speaker 3: have individually, perhaps not changed the equation for competition, but
Speaker 3: collectively have made generic competition both much more challenging and
Speaker 3: much less rewarding. So to give you give you a
Speaker 3: couple of examples, and maybe just to you know, as
Speaker 3: a reminder, most generic companies, a typical generic company, UH
Speaker 3: maybe actively marketing hundreds of different products. So with it
Speaker 3: with a generic what's what's always important is what that
Speaker 3: portfolio looks like. And they're and they're constantly assessing their
Speaker 3: portfolio and managing the balance between newer, higher value generics
Speaker 3: UH and and older commoditized you know, lower lower lower
Speaker 3: priced generics, and and the balance there's critical. And what
Speaker 3: we've seen is several years of slower coverage, slower than
Speaker 3: historic norms coverage of new generics. So what I mean
Speaker 3: by that is, for instance, in the Medicare drug program, UH,
Speaker 3: it takes three years or more for new generics to
Speaker 3: be covered on as many as half of all part
Speaker 3: y plan formulas. That's a huge shift. Plans are just
Speaker 3: taking longer to cover new generics, and and those are
Speaker 3: those are where a lot of companies remain sustainable on
Speaker 3: the back end of that portfolios. You think of the
Speaker 3: older generics, these products are facing years of price deflation.
Speaker 3: The generic marketplace has always been deflationary and that's part
Speaker 3: of what has driven the value. But we've seen over
Speaker 3: the past six plus years is a sustained period of
Speaker 3: greater than historical norms price deflation, far below any level
Speaker 3: of sustainable production. So the result is that whereas for
Speaker 3: years manufacturers may have been able to remain an older,
Speaker 3: low or negative margin markets because of the value of
Speaker 3: new generic launches, those with with slower adoption of new generics.
Speaker 3: That's putting more pressure on the entire enterprise. And so
Speaker 3: I do think, you know, we are, we are very
Speaker 3: concerned that there is a sustainability sustainability challenge. We think
Speaker 3: the shortages that we're seeing, we think some of the
Speaker 3: announcements that you see from different companies are indicators of that.
Speaker 3: As manufacturers are forced to revisit rationalize their portfolios.
Speaker 1: Adding on top of that, we now have the IRA
Speaker 1: in place, right, which is bringing in a whole new
Speaker 1: set of unknowns and questions and perhaps incentives or disincentives. So,
Speaker 1: turning to the IRA specifically, what do you think are
Speaker 1: the key changes for generic and biosimilar manufacturers under this
Speaker 1: new law?
Speaker 3: Yeah, so I would highlight a couple pieces in particular.
Speaker 3: The two headliners, obviously are the negotiation provisions, which have
Speaker 3: the potential to be highly impactful to generic and bisolars,
Speaker 3: as well as the part D redesign provisions that were
Speaker 3: included as part of the legislation. I would also note
Speaker 3: there were other provisions affecting generics and biosimilars. The legislation
Speaker 3: created a temporary period of higher reimbursement for providers who
Speaker 3: use biosimilars the ASP plus eight provision, and I would
Speaker 3: say the inflation penalty provisions included inn IRA, even though
Speaker 3: they're they're they're much narrow narrower when it comes to generics,
Speaker 3: certainly certainly have the potential to impact generics in particular
Speaker 3: depending on how CMS implements those provisions.
Speaker 1: So, drug pricing reform has been a long standing goal
Speaker 1: of Democrats, with a variety of proposals introduced over the
Speaker 1: years to lower drug prices, and now we have the IRA,
Speaker 1: which has actually been implemented in past. Do you think
Speaker 1: the IRA was written with the generic industry in mind
Speaker 1: or do you find that it's two focused on branded
Speaker 1: drug prices?
Speaker 3: Yeah, thanks for the question. What I think? I would
Speaker 3: say that the legislation was very clearly focused on brand drugs.
Speaker 3: I think they attempted to take into account the needs
Speaker 3: of generics and biosimilars, but it's our view that they
Speaker 3: could have done more. So, for instance, tailoring how they
Speaker 3: did the negotiation provisions, teasing out the inflation penalty provisions
Speaker 3: to more extensively account for the unique differences in those
Speaker 3: markets I think would have been very worthwhile.
Speaker 2: So let's dig into that aspect of the law. We
Speaker 2: do know that first market generics can enter at a
Speaker 2: price point that's roughly a third of the brand drug.
Speaker 2: We also know that the negotiation process will lead to
Speaker 2: cuts for high expenditure drugs of at least twenty five
Speaker 2: percent with no floor, some drugs could see price cuts
Speaker 2: of more than sixty percent. So in what ways do
Speaker 2: the negotiation provisions of the IRA alter some of the
Speaker 2: incentives for generic and bi similar manufacturers.
Speaker 3: Yeah, good question. I think the key word is you
Speaker 3: were talking through how those price cuts, what those price
Speaker 3: cuts could be. The keyword is could. And you know,
Speaker 3: if I were asked asked to summarize the impact of
Speaker 3: this on generics and biosimilars in a word, I'd say uncertainty.
Speaker 3: This legislation creates a massive dose of uncertainty for future
Speaker 3: generic and biosimilar competition. What I mean by that the
Speaker 3: legislation again, they attempted to tailor this and take into
Speaker 3: account generics and biosimilars and not harm generic and by
Speaker 3: some or competition, so as in order to achieve that,
Speaker 3: they wrote the legislation so that a product is removed
Speaker 3: from negotiation or exempted from negotiation if a generic or
Speaker 3: a biosimilar is approved and marketed. But it's less than clear,
Speaker 3: and in some cases it's going to be quite challenging
Speaker 3: to ensure that a generic or biosimilar is actually on
Speaker 3: the market before negotiation kicks in. The timelines that they
Speaker 3: establish for exposing a brand drug to negotiation may or
Speaker 3: may not line up with realistic timelines for getting a
Speaker 3: generic or a biosimilar licensed or approved on the market.
Speaker 3: And so what this means is that a generic or
Speaker 3: a biosimilar manufactor is going to have to factor that
Speaker 3: into their decision making. And keep in mind, a generic
Speaker 3: or buy a similar manufacturer is making a decision on
Speaker 3: whether to invest in a competitive product years before negotiation
Speaker 3: kicks in. That decision on an investment is happening in
Speaker 3: the first one to three years after a brand drug launches.
Speaker 3: And you know, for some let's say it's a simple
Speaker 3: small molecule, maybe that's a relatively low cost somewhere between
Speaker 3: five and twenty five million dollars for a development program.
Speaker 3: But that's not the case for all generics, and certainly
Speaker 3: not for biosimilars. The development costs for specialty complex generics
Speaker 3: can be quite quite expensive. I think the generic ad
Speaker 3: Bere was reported to have cost or roughly eight hundred
Speaker 3: million dollars to develop. We consistently hear from BUYO similar
Speaker 3: manufacturers that the cost of developing a buy similar ranges
Speaker 3: between one hundred and three hundred million dollars. So now,
Speaker 3: all of a sudden, generic can buy similar manufacturers are
Speaker 3: having to make a decision on an expensive investment years
Speaker 3: before they know will the brand be negotiated or will
Speaker 3: they be able to get to market before that negotiation
Speaker 3: kicks in. And if they don't get to market, what
Speaker 3: will the negotiated price be? What will the addressable market be?
Speaker 3: Because the legislation provides guidelines, but it sets a ceiling price,
Speaker 3: it doesn't set a floor, and so how will CMS
Speaker 3: set that price? All of these are unknowns that are
Speaker 3: going to really affect the incentives and the decision making
Speaker 3: for future generic surviisi lars.
Speaker 2: So it feel like you've laid out well some of
Speaker 2: the potential disincentives here, and it's largely because of the unknowns,
Speaker 2: the uncertainty around how this is going to play out,
Speaker 2: not for the not just for those companies that are
Speaker 2: directly impacted through negotiation, but also some of the other
Speaker 2: players that would like to jump into the market, like
Speaker 2: the generic manufacturers and biosimilar manufacturers. So with that in mind,
Speaker 2: is there a realistic scenario where a manufacturer subject to
Speaker 2: a maximum fair price under the law ceases to produce
Speaker 2: that drug at some point but there isn't a generic
Speaker 2: alternative because of some of these disincentives we've talked about.
Speaker 2: Is that a possibility or is that far fetched?
Speaker 3: No, I think it's a real possibility. I don't think
Speaker 3: that we can expect a manufacturer of a brand drug
Speaker 3: that is negotiated and it receives an MFP. I don't
Speaker 3: think it's reasonable or realistic to expect that manufacturer to
Speaker 3: stick around producing that drug and perpetuity, particularly as the
Speaker 3: MFP goes down over time. And I think it is
Speaker 3: our concern that you're going to see fewer and slower
Speaker 3: generic entrance. Yeah, you know what that looks like is
Speaker 3: going to depend on a number of factors. Right, It's
Speaker 3: going to depend on the cost of IP litigation, the
Speaker 3: cost of the development program. It's going to depend on
Speaker 3: the market size. It's going to depend on what is
Speaker 3: the medicare share of a market. Right, It's going to
Speaker 3: be different if you're talking about a about entering a
Speaker 3: market where Medicare accounts for two thirds of the market opportunity,
Speaker 3: all of a sudden, the m p IS is is
Speaker 3: even more impactful. There. There's just a few of the
Speaker 3: things that that I think generics and biosimilars are going
Speaker 3: to be to be looking at in terms of whether
Speaker 3: to come to market. And and I think there there's
Speaker 3: some some UH certainly some academics out there have highlighted
Speaker 3: the concern you raised, Wayne, that that a brand isn't
Speaker 3: necessarily going to stay in a market in in perpetuity.
Speaker 3: They're going to look for uh new opportunities, for new innovation,
Speaker 3: for new ways to UH realize a higher return on capital.
Speaker 3: That's that's a natural and frankly a good thing that
Speaker 3: we ought to be ought to be encouraging.
Speaker 2: UH.
Speaker 3: A lot of the markets today the generics are serving,
Speaker 3: have been long abandoned by the brands, and so as
Speaker 3: we talk about shortages, I think there is a risk
Speaker 3: that over time, if done poorly, you could drive greater shortages.
Speaker 1: I like what you said about uncertainty and timing considerations
Speaker 1: and challenges because I know when I think of, for example,
Speaker 1: small molecules, and you're looking at when that patent litigation
Speaker 1: is going to kick off in those decisions, that litigation,
Speaker 1: if it's a new chemical entity, is likely to get
Speaker 1: kick off about four years after that product was approved,
Speaker 1: Whereas you're going to have to be making those decisions
Speaker 1: for the branded and the generic well before that drug
Speaker 1: is even on the negotiated list, or you know, what
Speaker 1: that negotiated pricing could be. And then I'm thinking about
Speaker 1: an example I'm looking at now where you have a
Speaker 1: litigation in where there were eighteen generic applicants. They're sort
Speaker 1: of trying to sort out right now what that generic
Speaker 1: entry date is going to be. Perhaps it'll be after
Speaker 1: twenty twenty six, But now you also have the IRA
Speaker 1: coming in potentially to cut that drugs Medicare price ahead
Speaker 1: of when those eighteen generics might enter the market, right,
Speaker 1: And so I'm sure that they're thinking about what that
Speaker 1: cost means to them. But you know, thinking about you know,
Speaker 1: the Hatch Waxman litigation system and the BPCIA litigation system,
Speaker 1: which is what we've used now to bring forward generics
Speaker 1: and biosimilars to the market. How do you think this
Speaker 1: disrupts that current system such that there could be disincentives
Speaker 1: for those generics or biosimilar manufacturers. And is it different
Speaker 1: for generics versus biosimilars given how the law has treated
Speaker 1: the timing for when price cuts could happen based on
Speaker 1: whether you're you know, a small molecule generic know or
Speaker 1: you know a large molecule.
Speaker 3: D Yeah, so let me react to the second half
Speaker 3: of that first, I think what I would say is
Speaker 3: the details, the specific details are going to differ between
Speaker 3: you know, the generic and bisimilar, and you know, but
Speaker 3: the fundamental analysis is going to be very similar, which
Speaker 3: is what is the incentive? What's what's the Now, all
Speaker 3: of a sudden, you you have a much bigger range,
Speaker 3: if you will, in what your addressable market might look like,
Speaker 3: because now you you you have to you know, today
Speaker 3: you account for what do we think the growth of
Speaker 3: that product over time is going to be? What are
Speaker 3: we what brand competitors do we think will come in?
Speaker 3: You know, these are some of the things you think
Speaker 3: about in that market. Now, all of a sudden you
Speaker 3: have to throw in that additional wild card of if
Speaker 3: the drug gets a negotiated price, what will that price
Speaker 3: be and how will that address the return? And oh,
Speaker 3: by the way, how will commercial payers respond? Will commercial
Speaker 3: payers try to adopt that price? And how's all that
Speaker 3: can play out? So you're certainly changing the incentive. And
Speaker 3: so if you're thinking about in under hatch Waxmen, for instance,
Speaker 3: if you're thinking about the incentive of one hundred and
Speaker 3: eighty days exclusivity for the rewards a generic for challenging
Speaker 3: a patent and entering earlier than expected. Maybe that incentive
Speaker 3: is still there, but maybe it changes the equation when
Speaker 3: it comes to whether to to take on the time
Speaker 3: and expense of a lengthy patent litigation. That, oh, by
Speaker 3: the way, impacts not just that first filer, but all
Speaker 3: those guys who typically are not first filers but draft
Speaker 3: on the entry of the first filing generic who does
Speaker 3: do that patent litigation? I think you have a similar
Speaker 3: dynamic in the biosimilar space. To give you a sense
Speaker 3: of it, keep in mind, the legislation says that small
Speaker 3: molecules are eligible for negotiation at year seven and biologics
Speaker 3: are eligible for negotiation at year eleven, and then if
Speaker 3: they're chosen, the negotiated price goes into effect two years later. Okay,
Speaker 3: but there was As we were working through this, I
Speaker 3: came across a study i'd forgotten about some academics. We're
Speaker 3: looking at the generic market, and they found that the
Speaker 3: most common time frame for a generic launch was somewhere
Speaker 3: between year twelve, years twelve and a half and fourteen
Speaker 3: and a half. So it doesn't really align with that
Speaker 3: year seven. Similarly, I mean for biologics, they're eligible at
Speaker 3: year eleven and it kicks in at year thirteen, but
Speaker 3: biosimilar face twelve years of brand biologic exclusivity. So you know,
Speaker 3: I guess, and there are folks who know this stuff
Speaker 3: better than me. I guess there is it is theoretically possible,
Speaker 3: perhaps to go through and check all those boxes and
Speaker 3: get approval and get the IP resolved and get to market.
Speaker 3: But I can say that so far in the bisimilar space,
Speaker 3: no one has done it, certainly not in that time frame.
Speaker 3: Is it is certainly a challenge that folks are going
Speaker 3: to face and that will affect for future investments.
Speaker 1: Yeah, and I think to that point too. You know,
Speaker 1: some of it is well because we have patents that
Speaker 1: were protecting longer than this seven year, nine year, eleven
Speaker 1: or thirteen, and so I'm certain it could be a
Speaker 1: conversation for a whole other podcast about whether this is
Speaker 1: a direct assault or indirect assault on our patent system,
Speaker 1: you know. But I do think that those are some
Speaker 1: of the issues to be worked through, and you know
Speaker 1: that for generics to consider in brands and whether it's
Speaker 1: worth the time, as you said, to really do that
Speaker 1: expensive patent litigation if you're going to be subject to
Speaker 1: negotiated prices, and if you're a generic entering in the market,
Speaker 1: what that's going to look like for your market once
Speaker 1: you enter if the brand drug does have price negotiation.
Speaker 1: But going back to also when we were talking about
Speaker 1: the timing for generic or biosimilar you know, launch and
Speaker 1: affecting the ability to be negotiated, the IRA does allow
Speaker 1: biosimilar manufacturers to request a negotiation delay for potentially eligible
Speaker 1: biologics if there's a high likelihood of biosimilar market entry.
Speaker 1: And you know, we've seen some of the guidance now
Speaker 1: come out from CMS about what this high likelihood could be.
Speaker 1: So in your view, you know, how has this policy developed,
Speaker 1: how do you think it's going to play out, And
Speaker 1: do you think that these policy makers and regulators got
Speaker 1: it right or perhaps is the bar too high for
Speaker 1: biosimilar manufacturers because I know when I think of this
Speaker 1: sometimes I wonder, for if you're at least you're on
Speaker 1: you know, the branded side, is there incentive to just
Speaker 1: stand back and let the biosimilar come on the market
Speaker 1: so you don't get negotiated, But you know, the biosimilar
Speaker 1: is the one that holds the hand to really request
Speaker 1: that you know, biosimilar exemption, so they'd have to show
Speaker 1: a high likelihood. So I think this is going to
Speaker 1: be a very important provision, you know in the IRA,
Speaker 1: that we you know, see play out, and we'd be
Speaker 1: interested in your thoughts.
Speaker 3: Yeah, that's a great question. I think that I think
Speaker 3: the best answer is in terms of the core question,
Speaker 3: is the bar too high? I think it remains to
Speaker 3: be seen. I think this is like some of these
Speaker 3: other things, that we're going to have to see how
Speaker 3: it plays out. And those biosimilar those two year delay
Speaker 3: requests are confidential between the biosimilar developers and CMS. The
Speaker 3: deadline for the first set of delay requests was earlier
Speaker 3: this summer. I believe it was in June, so I
Speaker 3: don't know if there were any delay requests put in
Speaker 3: or how those are going. I do think that there
Speaker 3: is there aspects of the standard that are valuable and
Speaker 3: appreciate the work that CMS has done on it. There
Speaker 3: are areas that we think can be further improved. We think,
Speaker 3: for instance, that CMS that that Congress intended to give
Speaker 3: the benefit of the doubt to buy similar developers here,
Speaker 3: and that Congress gave a backstop to CMS in case
Speaker 3: it gets it wrong, right, So, so CMS understandably is
Speaker 3: concerned about that determination of high likelihood. But keep in
Speaker 3: mind the legislation provides that if CMS grants a two
Speaker 3: your delay request and the biosimilar for whatever reason, is
Speaker 3: not able to launch during that time, that the brand
Speaker 3: is then on the hook for a rebate equivalent to
Speaker 3: what they would have paid had a negotiated price cone
Speaker 3: into effect. And so we think that was intended by
Speaker 3: Congress to create a back end protection for CMS for
Speaker 3: what is understandably a really difficult decision of how on
Speaker 3: earth you determine high likelihood of buy a similar launch.
Speaker 3: I think CMS is having to figure out what that
Speaker 3: means on the IP side, how to assess the patent
Speaker 3: landscape and whether a buy similar is likely to launch,
Speaker 3: for instance, And I think that is going to be
Speaker 3: a work in progress. So I think it's just one
Speaker 3: that we're going to have to continue to work with
Speaker 3: the agency on.
Speaker 2: And it's interesting because when we think about that guidance,
Speaker 2: it's not the guidance for the program moving forward in perpetuity.
Speaker 2: It is the guidance for applicable year twenty twenty six,
Speaker 2: And so I think that sets up an opportunity for
Speaker 2: learning as we go, and we could see CMS continue
Speaker 2: to think, rethink how it's going to apply this, and
Speaker 2: we'll learn more once they actually actually do this moving forward,
Speaker 2: and so a new surprise. We started with the negotiation
Speaker 2: piece of the IRA that gets most of the attention,
Speaker 2: but it's also worth thinking about how some of the
Speaker 2: other pieces of the IRA play a role for generics
Speaker 2: in the biosimilar industry, but the drug industry as a whole,
Speaker 2: and one of those is the part the readers. I
Speaker 2: don't think it gets enough attention when we think about
Speaker 2: the IRA, but wanted to get your thoughts here because
Speaker 2: it truly does that that piece of the law, the
Speaker 2: part Y redesign, does change the financial responsibility of the
Speaker 2: players involved, whether it's the government, the part D plans manufacturers.
Speaker 2: Can you give us a sense from where you sit
Speaker 2: the importance of the redesign and how that could play
Speaker 2: out for generic and biosimilar manufacturers.
Speaker 3: Yeah, yeah, absolutely so. I think there are two key
Speaker 3: pieces of the party redesign that I would highlight, the
Speaker 3: two thousand dollars out of pocket cap for patients and
Speaker 3: the requirement that that be applied through a smoothing fashion
Speaker 3: where where it's applied over twelve months and not necessarily
Speaker 3: two thousand dollars up front. But also then Dwayne, to
Speaker 3: your point, the legislation increases the liability of Part D plans,
Speaker 3: so it increases how much Part D plans are on
Speaker 3: the hook for in the administration of the of the program. Now,
Speaker 3: I think the goal of that is to make those
Speaker 3: plans more cost sensitive and to make them to create
Speaker 3: greater incentives for them to use lower cost products as
Speaker 3: they manage the benefit. And I would say that the
Speaker 3: legislation goes a significant way, but probably didn't complete the job. So,
Speaker 3: for instance, I mentioned that we've seen a significant trend
Speaker 3: over the last six seven years of plans being Part
Speaker 3: D plans being slow to cover new generics. We believe
Speaker 3: that an aspect of that will be reduced by this legislation.
Speaker 3: But what the legislation did not touch was the power
Speaker 3: of the of the rebate to the PBM. So so
Speaker 3: the legislation may have changed some of the incentives for
Speaker 3: the plans, but not necessarily the incentives for the for
Speaker 3: the PBMs who are who are managing the drug benefit
Speaker 3: for those plans. So so it's a it's an important step,
Speaker 3: but we do think there's more that needs to be
Speaker 3: done to address some of those dynamics.
Speaker 2: And I think Congress has picked up on that of it.
Speaker 2: The focus this year seems to be a lot on
Speaker 2: the role of PBMs in the drug supply chain. And
Speaker 2: so we'll see what, if any, kind of steps this
Speaker 2: Congress will take in addressing some of the concerns you raised.
Speaker 2: And so when we think about the party redesign, there's
Speaker 2: an opportunity for plans and an incentive for plans to
Speaker 2: shift some of their formulators to favor some products with
Speaker 2: lower list prices. It may be one incentive for industry.
Speaker 2: What other incentives are there in the law that we
Speaker 2: can we can share today. One that comes to mind
Speaker 2: is this provision about the ASP plus eight percent, and
Speaker 2: so when we think about current law, it's ASP plus
Speaker 2: six we're regardless of whether it's the reference biologic or
Speaker 2: the biosimilar. And there's been some concern that because the
Speaker 2: biologic has the higher price and it's the ASP plus
Speaker 2: a percentage of that, there's an incentive to still use
Speaker 2: that higher price product. Do you think that this attempt
Speaker 2: to provide an added payment for the use of the
Speaker 2: biosimilar will help. What are your thoughts.
Speaker 3: There, Yeah, I think I think the common thread that
Speaker 3: you're seeing as we work through these is you have
Speaker 3: a set of incentives that have grown up over time
Speaker 3: and maybe enshrined in law or regulation, but we're not
Speaker 3: intended as such. But the end result is that they
Speaker 3: encourage whether it's plans, PBMs, or in this case, they
Speaker 3: can encourage providers to use a product that is a
Speaker 3: higher cost product instead of a generic or biosimilar. The
Speaker 3: ASP plus eight provision is an important provision. What it
Speaker 3: does is it says that for the next five years,
Speaker 3: the add on payment for the reimbursement that a provider
Speaker 3: receives when they use a biosimilar will be higher. It'll
Speaker 3: be eight percent of the brand ASP than the reimbursement
Speaker 3: they receive when they use the brand biologic. That's an
Speaker 3: important step, and I think part of part of the
Speaker 3: importance of it is simply that it now for the
Speaker 3: first time you have Congress and CMS saying, look, we
Speaker 3: want to align the incentives to encourage the use of
Speaker 3: the lower cost product, even if that means we're paying
Speaker 3: more for the lower cost product than we might otherwise.
Speaker 3: And that's an important step. Is there more that they
Speaker 3: can do? We absolutely believe that there is, and we
Speaker 3: think that there's work that CMS could do under their
Speaker 3: own authority or under a demonstration project. And CMS is
Speaker 3: a lot of work going on in the space. But
Speaker 3: we have seen examples if we look at the oncology
Speaker 3: care model, for instance, where if you make providers sensitive
Speaker 3: to the cost of the products, you can encourage use
Speaker 3: of those lower cost biosimilars.
Speaker 2: And so with all of that in mind, let's think
Speaker 2: about kind of the next step for the AAM, not
Speaker 2: just as it relates to the IRA, but some of
Speaker 2: the other issues we've talked about. You had mentioned drug
Speaker 2: shortages and the challenges there. What are some of the
Speaker 2: policy solutions you all support as it relates to drug shortages.
Speaker 2: What are some of the policy solutions that have been
Speaker 2: proposed that might be of concern?
Speaker 3: So I think what people would hear from us is
Speaker 3: the need to look at this market holistically. Right now,
Speaker 3: there's a lot of interest in drug shortages, and rightly so,
Speaker 3: but it's really important that we not settle for a
Speaker 3: couple of band aids here and there that don't address
Speaker 3: the root causes of those shortages, and the root causes
Speaker 3: of those shortages fundamentally are market and policy changes that
Speaker 3: have made generic competition more difficult and less rewarding. That
Speaker 3: means that means looking at the incentives for coverage and
Speaker 3: adoption of new generics and new biosimilars. That means looking
Speaker 3: at things like the Medicaid inflation penalty and prices of
Speaker 3: generics in the three point forty v program that make
Speaker 3: the continued production of low margin or even negative margin
Speaker 3: generics unsustainable. It means also looking at the role of
Speaker 3: other players in the system, so providers for instance, and
Speaker 3: creating incentives for providers to purchase to purchase generics in
Speaker 3: a way that is sustainable over the long run, because
Speaker 3: because the reality is as I mentioned earlier, generics today
Speaker 3: are serving thousands of unprofitable markets where the brand has
Speaker 3: long ago left that market. And so it really is
Speaker 3: in our be important to address the market as a
Speaker 3: whole as we think about the future of generic and
Speaker 3: buy similar competition.
Speaker 2: So I think we'll hear a lot more about the
Speaker 2: issue of drug shortages for the rest of this Congress
Speaker 2: and this year, next year moving forward. And so I
Speaker 2: do want to turn to the IRA and get your
Speaker 2: sense of Okay, what are some of the next steps
Speaker 2: that Congress can take when when if they're able to
Speaker 2: think about some opportunities moving forward looking at the administration,
Speaker 2: there might be some opportunities to tweak some of the
Speaker 2: guidance and other issues as well. What's your agenda as
Speaker 2: you look at some of the changes to the IRA.
Speaker 3: Yeah, thanks for that. I think obviously PBMs and drug
Speaker 3: shortages are high on the topic. Last I checked their
Speaker 3: six or seven Congress national committees working on PBMs, and
Speaker 3: we we are receiving a significant number of questions on
Speaker 3: drug shortages. So that's an issue that has very clearly
Speaker 3: captured people's attention and concern and rightly so, I think
Speaker 3: as we think about the future of IRA, I think
Speaker 3: a lot of that work is really going to be
Speaker 3: continued work with CMS on the implementation of it. So,
Speaker 3: for instance, has the BUYO similar two year delay process working,
Speaker 3: What how are the different elements of this working, both
Speaker 3: for manufacturers as well as for CMS, because because everyone's
Speaker 3: going to learn as they work through this process, and
Speaker 3: so so I'd say that's where I expect a lot
Speaker 3: of the attention to be on IRA. Over at least
Speaker 3: the immediate future.
Speaker 1: I think if I had to sum up maybe one
Speaker 1: of the key themes of our discussion today, it would
Speaker 1: be uncertainty and unknowns. And now adding into the mix
Speaker 1: of all of that, we've seen various stakeholders, including some
Speaker 1: branded pharmaceuticals, challenging the IRA law itself and so just
Speaker 1: wondering if you have any thoughts on that or you
Speaker 1: know how that could be adding to the uncertainty and
Speaker 1: the unknowns over the next year or so.
Speaker 3: Yeah, So disclaimer, I'm I'm not an attorney, so I
Speaker 3: like everyone else, I'm kind of watching with interest to
Speaker 3: see what happens with that that litigation. I guess, sit
Speaker 3: back with some popcorn and see see how that goes.
Speaker 3: I think it is simply one more unknown and that that,
Speaker 3: to me is at the end of the day, we
Speaker 3: have we have things we know, we have things we
Speaker 3: don't know, and then we have a whole list of
Speaker 3: things that we don't know that we don't know around
Speaker 3: this legislation and how it's going to go.
Speaker 1: Yeah, this should be an interesting year couple years to
Speaker 1: say the least. But with that, I think we'll wrap
Speaker 1: up this episode of some and verdicts. We are extremely
Speaker 1: grateful to Craig Burton for joining us today. I think
Speaker 1: it was a really informative discussion about public policy and
Speaker 1: things that we will be talking about likely for years
Speaker 1: to come, and we thank you the listener for taking
Speaker 1: the time to join us as well. As a reminder,
Speaker 1: you can read all of our Bloomberg intelligence research on
Speaker 1: the Bloomberg terminal at Big Thanks again and have a
Speaker 1: great day.
Speaker 2: I think
Speaker 1: Sh