Speaker 1: Hello everyone, and welcome to the Votes and Verdicts podcast,
Speaker 1: hosted by the policy and Litigation team at Bloomberg Intelligence,
Speaker 1: the investment research platform of Bloomberg LP. This podcast series
Speaker 1: examines the intersection of business policy and law. I'm Tishwalker
Speaker 1: and analysts with Bloomberg Intelligence covering pharma patent litigation. Today,
Speaker 1: I'll be joined by my colleagues Duane Wright, a senior
Speaker 1: policy analyst covering healthcare policy, and ode Gerspatcher, who leads
Speaker 1: the Global Healthcare team and also covers patent and healthcare litigation.
Speaker 1: They're going to be doing the heavy lifting today as
Speaker 1: we discuss key policy, regulatory, and litigation issues that impact
Speaker 1: the therapeutic sector. This includes the Inflation Reduction Act, drug
Speaker 1: pricing implementation and the legal challenges there too, the three
Speaker 1: forty B drug discount program and related litigations, as well
Speaker 1: as Medicare coverage outlook for some newer therapeutics. Let's dive
Speaker 1: right into it. We're going to start with the Inflation
Speaker 1: Reduction Act, or the IRA. Dwayne, My first question is
Speaker 1: going to be for you. So we've been talking about
Speaker 1: the IRA, it seems like for almost two years now.
Speaker 1: So where does implementation stand today for the drug pricing
Speaker 1: provisions of the law and what do you think we
Speaker 1: should expect over the coming months.
Speaker 2: Thanks Tish. So this is an issue where there are
Speaker 2: parallel tracks with the IRA, and I'll focus on the
Speaker 2: policy and implementation phase. And so I think we're in
Speaker 2: the quiet phase of the negotiation process that we've heard
Speaker 2: anecdotes about Medicare's initial offer and the fact that pharma
Speaker 2: companies have countered. So the initial offer was provided by
Speaker 2: CMS February first, and while will not surprised that pharma
Speaker 2: kept them secret, we did hear from one CEO that
Speaker 2: the offer at least wasn't outrageous and so this will
Speaker 2: all culminate in a final take or leave it offer
Speaker 2: on July fifteenth and end negotiations around August first. The
Speaker 2: key here, which is what we've talked about a lot
Speaker 2: at PI, is that will know the maximum fair price
Speaker 2: by September first. And as a reminder, the law sets
Speaker 2: in place a maximum fair price for these drugs, which
Speaker 2: is based on the amount of time it's been on
Speaker 2: the market or FDA approved a higher ceiling for those
Speaker 2: that have been on the market for a shorter amount
Speaker 2: of time and a much lower ceiling price for those
Speaker 2: products that have been on longer. We'll see an explanation
Speaker 2: for those maximum fair prices in March of twenty twenty five.
Speaker 2: And keep in mind the factor for setting the maximum
Speaker 2: fare price include R and D cost, production costs, market
Speaker 2: data in the US, and other factors. One thing I'm
Speaker 2: looking for to is how medicare pricing could affect pricing
Speaker 2: for other payers. I don't think there's a lot of
Speaker 2: consensus on the issue. There's some concern by employers that
Speaker 2: are worried about potentially higher costs to make up for
Speaker 2: Medicare losses. Some would say that if that was the case,
Speaker 2: we'd already see higher prices, But it could also be
Speaker 2: the case that just because Medicare gets a specific price
Speaker 2: employers those in the commercial market might not be able
Speaker 2: to demand that same price. So time will tell as
Speaker 2: to what the spillover effects will have. But we're looking
Speaker 2: forward to the next couple of months playing out where
Speaker 2: there are counter offers and potentially meetings between CMS and
Speaker 2: the drug makers over what that maximum fair price should be.
Speaker 1: Yeah, I think that's going to be interesting and certainly
Speaker 1: something that everyone is looking forward to, especially you know
Speaker 1: what you noted on how could this impact pricing outside
Speaker 1: of the meticicare market. Now we've heard some you know,
Speaker 1: I know there's been some movement to maybe look at
Speaker 1: modifications to the law. We've talked a lot about parity.
Speaker 1: So what's your outlook on modifications to law? Do you
Speaker 1: see any potential changes in the works.
Speaker 2: So when the initial bill came out and became law,
Speaker 2: there was pushed back by pharma or a whole host
Speaker 2: of reasons, but there was targeted feedback in terms of
Speaker 2: some of the pieces that they didn't like and set
Speaker 2: the stage for potential modifications. Now, to answer the question,
Speaker 2: I would say that the likelihood of modifications in the
Speaker 2: near term is pretty low, and I'll get into why
Speaker 2: in a second, but I'll focus on what some of
Speaker 2: these pieces might be. One area is in the space
Speaker 2: of orphan drugs, and we need to keep in mind
Speaker 2: what the law does. The IRA exempts from negotiation those
Speaker 2: orphan drugs designating for only one rare disease or condition
Speaker 2: where the approved indication is for the disease or conditions.
Speaker 2: So drugs with multiple designations for multiple rare diseases or
Speaker 2: conditions aren't exempts, even if the additional indications haven't been
Speaker 2: approved by the FDA, And as a reminder, orphan drugs
Speaker 2: are used to treat rare diseases or conditions that affect
Speaker 2: fewer than two hundred thousand people in the US. It's
Speaker 2: an open question as to how many of these orphan
Speaker 2: drugs would be affected under the law, because you have
Speaker 2: to keep in mind there is a spending threshold two
Speaker 2: hundred million dollars per year in medicare spending to qualify
Speaker 2: as a drug negotiation eligible drug. And so we've written
Speaker 2: about how some studies have shown orphan drugs are approved
Speaker 2: just for one rare disease, there's a small number approved
Speaker 2: for multiple rare disease, multiple rare diseases, and then a
Speaker 2: slightly larger portion that are proved for a rare and
Speaker 2: common disease. So what this, what a proposal would do,
Speaker 2: is exempt from negotiation drugs that have orphan designations for
Speaker 2: one or more rare diseases or conditions. I'll get into
Speaker 2: the outlook in a second. There's a separate bill that
Speaker 2: is another pharma priority, which would create parity between how
Speaker 2: small and large molecules are treated under negotiation. As a reminder,
Speaker 2: small molecules become heligible for the program after seven years
Speaker 2: of that the approval the large molecules are eleven, with
Speaker 2: the prices implemented after nine to thirteen years. And the
Speaker 2: concern from not just pharma but also other stakeholders is
Speaker 2: the potential for distincentivizing R and D development into these
Speaker 2: smaller molecules and a shift towards these large molecule drugs.
Speaker 2: And so what a proposal would do is allow for
Speaker 2: parody between small and large molecule drugs by making them
Speaker 2: the negotiation eligible at the same time after eleven years,
Speaker 2: as opposed to the split. Now, we took a look
Speaker 2: at what that might mean if that bill were to
Speaker 2: become less year or that provision was in the IRA.
Speaker 2: The interesting thing is when you think about next year's list,
Speaker 2: which we'll go into a bit later, drugs like a
Speaker 2: zembic and drugs like standy would not be subject to
Speaker 2: negotiation until much further out later into this decade. But
Speaker 2: it also means that there are other drugs that would
Speaker 2: take its place on the list. So as we think
Speaker 2: about the outlook, one, Democrats aren't really chumping at the
Speaker 2: bit to make any changes to the law. While the
Speaker 2: bills do have democratic support, it's not overwhelming, and it's
Speaker 2: unclear if it I don't say it's unclear. I highly
Speaker 2: doubt that Republicans would bring up a bill to modify
Speaker 2: the law as opposed to just repeal it outright, So
Speaker 2: I think the again, the outlook on any kind of
Speaker 2: movement for these bills is very low. And this is
Speaker 2: great bodder for members of Congress to talk about how
Speaker 2: the law is imperfect and how it could impactation access.
Speaker 2: But it's really just a talking point that sets up
Speaker 2: a conversation for twenty twenty five in the next Congress.
Speaker 1: Well, as you just alluded to here, I mean, we're
Speaker 1: in an election year, so you know, thinking about potentially
Speaker 1: a different administration, can you forecast how let's say a
Speaker 1: potential Trump administration might implement or deal with the IRA
Speaker 1: and what could he pursue to perhaps weaken the law.
Speaker 2: Yeah, so a lot depends on what happens with the
Speaker 2: outcome of the election, not just at the presidential level,
Speaker 2: but also with Congress. I'll focus on what President Trump
Speaker 2: can do. And I think it's worth noting that candidate
Speaker 2: Trump between sixteen supported negotiation and did in fact propose
Speaker 2: some of his own ideas on how to lower prices
Speaker 2: by or through international reference pricing, tying prices for Part
Speaker 2: B drugs, some part drugs to what's paid overseas. But
Speaker 2: he did during his four years in office back away
Speaker 2: from negotiation that said, what can he do keeping in
Speaker 2: mind that the underlying loss sets a sealing price for
Speaker 2: these drugs, these negotiation eligible drugs, but CMS can negotiate
Speaker 2: prices below that. You could see one of two things happened.
Speaker 2: One Trump could say could do nothing and just do
Speaker 2: the bare minimum, and his HHS basically does what the
Speaker 2: laws says is the maximum or the minimum that they
Speaker 2: can do in terms of price cuts. He could say
Speaker 2: he's the master negotiator and go for much deeper discounts
Speaker 2: than you might see under a Biden administration. So that's
Speaker 2: one potential way he could go about implementing this law.
Speaker 2: There are other avenues, such as some of the definitional
Speaker 2: pieces that were clarified as part of guidance last year.
Speaker 2: So as an example, we have terms like single source
Speaker 2: drug and which is in the in the statute, but
Speaker 2: you also have terms like bonified generic marketing and competition,
Speaker 2: which is basically a regulatory interpretation. Bonifide's not statute, and
Speaker 2: it's a determination that is at least CMS said will
Speaker 2: be made on a case by case basis as to
Speaker 2: whether or not a drug as a bonafied generic competitor
Speaker 2: for purpose of purposes of being selected or getting off
Speaker 2: the list. And what CMS has said is that it
Speaker 2: will weigh factors like generic utilization of a drug, a
Speaker 2: generic and prescription drug event data to determine if there's
Speaker 2: a bonafide marketing. Now that's the bonafide side. On the
Speaker 2: single source side, the agency defined it as based on
Speaker 2: the active ingredient, which enables it to group multiple therapies
Speaker 2: with different either NDAs or blas. And we could see
Speaker 2: a Trump administration narrow the interpretation of what it means
Speaker 2: to be a single source drug, which would potentially limit
Speaker 2: some of these limit the number of drugs or type
Speaker 2: of drugs that are subject to negotiation. You know, I
Speaker 2: want to go back to the bonafide piece and why
Speaker 2: that's important I mentioned it earlier. It determines whether a
Speaker 2: drug gets on the list or gets off. If there's
Speaker 2: a bond phi generic before the end of the negotiation process,
Speaker 2: then the drug won't see price cuts for the first
Speaker 2: applicable year. If we see or CMS determines that there's
Speaker 2: a bonophi generic after the negotiation process, but before April
Speaker 2: of the applicable price year, the price cuts to the
Speaker 2: brand drug going to effect for that year, but they
Speaker 2: will not be effective the year after. And then if
Speaker 2: it's after the April of the first year, then those
Speaker 2: price cuts as negotiated will be in effect for two years.
Speaker 2: So that timing is pretty critical, and that's important because
Speaker 2: when you think about some of the negotiated prices, they
Speaker 2: could be much lower than what we would see from
Speaker 2: generic typical generic entry. So looking at some data provided
Speaker 2: by FDA, we did see that in some cases, if
Speaker 2: it's an extended monopoly or a long monopoly drug, the
Speaker 2: price would be pretty much lower than what we see
Speaker 2: from typical first to market generics. So that could have
Speaker 2: an impact on generic manufacturers, and obviously it could have
Speaker 2: an impact on brand manufacturers as well. So a lot
Speaker 2: of these interpretations could have a pretty significant impact on
Speaker 2: how the law impacts a lot of these companies moving forward.
Speaker 1: Yeah, and I know we've talked about it on podcasts before,
Speaker 1: just potentially even how it impacts generic litigation strategy and
Speaker 1: how a company is going to approach that given the timelines.
Speaker 1: But what about repeal, I mean, do you think that's
Speaker 1: possible at this point that the law could be repealed.
Speaker 2: I'm skeptical at this point, and largely because the key
Speaker 2: date coming up is the September first date when the
Speaker 2: maximum fair prices will be public, and then next year
Speaker 2: when they're when the explanation for those prices is made available.
Speaker 2: And so I think we have to remember that the
Speaker 2: pieces of the IRA that drug pricing components are actually
Speaker 2: very popular, and so once those prices are out and
Speaker 2: there's this expectation of lower prices, I think it might
Speaker 2: be hard to kind of pull that back and say
Speaker 2: to people, know, you don't deserve those lower prices. The
Speaker 2: program doesn't deserve those lower prices. So I think there
Speaker 2: might be a bit of an optics challenge for trying
Speaker 2: to repeal it now. I think all of that depends
Speaker 2: on what happens with the election, But even if there
Speaker 2: is a sweep on the Republican side, I'm still skeptical
Speaker 2: at this point that we could see some kind of
Speaker 2: legislative action that repeals the law.
Speaker 1: So, you know, given that you know, there's maybe some
Speaker 1: skeptical on whether repeal is possible. Obviously, there's been several
Speaker 1: drug manufacturers that have challenged this law in court, so oed,
Speaker 1: I'm going to turn the focus to you. So on
Speaker 1: the litigation front, what are the key procedural and constitutional
Speaker 1: challenges that have been brought so far about this drug
Speaker 1: about the drug pricing provisions of the IRA, and how
Speaker 1: have the courts ruled so far in these cases?
Speaker 3: Yeah, thanks, Tish. So the main you know, if we're
Speaker 3: talking about challenging the law, there are four constitutional challenges
Speaker 3: that we see over and over again in all of
Speaker 3: these litigations, and then there are also some statutory challenges.
Speaker 3: Most of them revolve around the Administrative Procedural Act, which
Speaker 3: is the law that governs the process of how government
Speaker 3: agencies can regulate. And so we think that if there's
Speaker 3: any chance of this these litigations to be successful to
Speaker 3: you know, negate this law, it would be a constitutional challenge,
Speaker 3: although it isn't argue that this is going to happen.
Speaker 3: But I will tell you about the four main arguments
Speaker 3: under the first, fifth, and eighth Amendments. The first is
Speaker 3: the first Amendment and that they under the compelled speech doctrine,
Speaker 3: which borrows the government from compelling people and then companies
Speaker 3: to say anything they don't want to say. The argument
Speaker 3: here is that the IRA compels drug companies to speak
Speaker 3: by mandating that they enter it and be signatories to
Speaker 3: certain negotiating agreements that essentially, they say, you know, makes
Speaker 3: them endorse the medicare prices as the maximum fair price.
Speaker 3: And there are two arguments under the Fifth Amendment. One
Speaker 3: is due process. We can talk a little bit about that.
Speaker 3: We talked about the March seventh hearing that we just attended,
Speaker 3: But that is the provision that prohibits the government from
Speaker 3: depriving a person of property without due process. So I
Speaker 3: mean that there must be an opportunity to prevent any
Speaker 3: deprivation of property i e. These pharmaceutical companies drugs. And
Speaker 3: then under the Fifth Amendment there is also taking this clause,
Speaker 3: and that taking as clause requires the government to pay
Speaker 3: just compensation when it takes private property. So here the
Speaker 3: argument is made that the IRA requires drug makers to
Speaker 3: enter to force sales at price discounts, and they say
Speaker 3: it's under the threat of corrosion because there are penalties
Speaker 3: attached to it. And they are not compensated for the
Speaker 3: price difference that they would get on the private markets.
Speaker 3: Then there's the Eighth Amendment of the US Constitution has
Speaker 3: a theory of excessive fines, and that just prohibits the
Speaker 3: government from imposing signs that are that exceed the punishment
Speaker 3: for a certain offense. And then of course the statutory challenges,
Speaker 3: you know, those are more sort of in the weeds.
Speaker 3: They have to do with guidance that CMS has issues
Speaker 3: or about issued or about certain definitions or lack thereof
Speaker 3: in the statute, et cetera. And so these we don't
Speaker 3: think would kill the law. We just think it would
Speaker 3: modify some behavior, probably by CMS. So so far we've
Speaker 3: seen ten lawsuits. One was dismissed very early on, two
Speaker 3: have been rolled on. One was in Texas and it
Speaker 3: was essentially dismissed for lack of standing in jurisdiction. And
Speaker 3: then a more recent one was the Astrodeneka case, which
Speaker 3: was also dismissed, and that was for lack of jurisdiction,
Speaker 3: but it also did address one constitutional challenge, which was
Speaker 3: the due process clause of the Fifth Amendment, and essentially
Speaker 3: the judge there said that he had no jurisdiction, but
Speaker 3: that because medicare participations in voluntary, there is no issue
Speaker 3: because the parties can just exit. The other seven cases
Speaker 3: which are still pending are actually all stimilarly situated where
Speaker 3: there have been motions and cross motions on summary judgment,
Speaker 3: each side asking the court to essentially throughout the case,
Speaker 3: and we are waiting on all those decisions. We just
Speaker 3: had a hearing in the New Jersey court and that
Speaker 3: was for for the cases that are in front of
Speaker 3: the same judge. But other than that, we have a
Speaker 3: case in the seven District of Ohio, one in Connecticut,
Speaker 3: and one in DC, and all of those are essentially
Speaker 3: waiting for the judge to decide. We haven't seen oral
Speaker 3: arguments in any other case. Besides the New Jersey ones
Speaker 3: are still pending. We haven't seen any requests for it.
Speaker 3: It's possible that that might come, or the judges could
Speaker 3: just decide to roll off of the papers that have
Speaker 3: been submitted.
Speaker 1: Let's talk a little more about that March seventh hearing
Speaker 1: you and I both attended. Certainly there were a lot
Speaker 1: of issues to be unpacked and argued that day. The
Speaker 1: judge certainly kept it lighthearted. The best he could, but
Speaker 1: there was a lot going on. So what were some
Speaker 1: of the key takeaways that you took from that March
Speaker 1: seventh District court hearing that involved, you know, the arguments
Speaker 1: from J and J. Bristol, Myers, Nova Nordisk, and nov Artists. Yeah.
Speaker 3: So, I mean, I'll focus on the constant titutional challenges
Speaker 3: because I think we'll just see more only one one
Speaker 3: party that was really talking about the statutory challenges. And
Speaker 3: like I said, I think the constitutional challenges are the
Speaker 3: ones that are more important to these drug companies if
Speaker 3: they just want to get out of this all together,
Speaker 3: which again we don't think they will, but that is
Speaker 3: the goal. So I'll start with actually the Fifth Amendment
Speaker 3: taking class, which was I think maybe surprising to both
Speaker 3: of us tis but definitely to me how much time
Speaker 3: the parties spent on it. They spent the hearing went
Speaker 3: full day, They spent pretty much half of their time
Speaker 3: talking about this particular issue. So, you know, it's my
Speaker 3: assumption that these pharmachool companies thought that this was probably
Speaker 3: their best argument. Like I said earlier, you know, this
Speaker 3: argument just really revolves around the fact that the drug
Speaker 3: makers say that they are you know, sort of forced
Speaker 3: to sell their products at a significant discount under this
Speaker 3: threat of coersion, which is also the topic of the
Speaker 3: Eighth Amendment. Right, these are the excessive fines that they
Speaker 3: talk about and with no compensation. So you know, the
Speaker 3: plaintiffs definitely argued at each turn that the IRA just
Speaker 3: specifically requires h HS to impose drug prices that fall
Speaker 3: well below what the companies would normally get on the
Speaker 3: private market, and so that difference is a is a
Speaker 3: big deal to them in the billions of dollars that
Speaker 3: they are fighting for. Like I said, they double down
Speaker 3: on this. We spent a lot of time on it.
Speaker 3: I think it's fair to say that there were a
Speaker 3: lot of questions, including from the judge, and we certainly
Speaker 3: had a lot of questions. But you know, essentially the plaintiffs,
Speaker 3: you know, for this issue, you know, argued to the
Speaker 3: judge that unlike you know, what I mentioned with the
Speaker 3: Astrozenica case, where the government had a defense of the
Speaker 3: participation of medicare being voluntary, the plaintiff's here just after
Speaker 3: judge and not consider that at all. Right, it's their
Speaker 3: position that the determination of whether there is a taking
Speaker 3: on their Fifth Amendment should be decided regardless of whether
Speaker 3: it's voluntary or not, if you're in the program, is
Speaker 3: it a taking or is it not a taking? And
Speaker 3: so that was a key question for the judge, you know,
Speaker 3: because I think that he in the very beginning, I
Speaker 3: actually couldn't read what he thought after they had argued
Speaker 3: all morning, but you know, he definitely thought the special
Speaker 3: issue was whether the statute of requiring whether the Medicare
Speaker 3: participation being voluntary was actually just the only issue that
Speaker 3: to decide. But the companies argue that the special issue
Speaker 3: is actually whether the statute which require the access to
Speaker 3: the maximum fair price is the physical taking of property.
Speaker 3: So they seem to argue that the ability to withdraw
Speaker 3: on this program doesn't have any bearing on this assessment.
Speaker 3: And so whether the judge bought that or not, I
Speaker 3: think will be key to you know, how he approaches
Speaker 3: this question, you know. And so and this is, like
Speaker 3: I said, very much entwined with Eighth Amendment, because the
Speaker 3: excise tax is coercive according to the companies, and so
Speaker 3: if the companies are quote unquote made to agree because
Speaker 3: of this, then they consider that a taking of their
Speaker 3: physical property. The judge did ask all the parties. You know,
Speaker 3: he kind of honed it on the idea of, like,
Speaker 3: has anyone withdrawn from this program? The government confirmed that
Speaker 3: no one had even tried, But that is something that
Speaker 3: he kept coming back to, and so I think that
Speaker 3: that's something in his mind that's probably pretty important. But again,
Speaker 3: I really and tissues jump in if you had a
Speaker 3: different impression, but I really didn't get the depression of
Speaker 3: like whether he agreed with the plaintiffs as to this
Speaker 3: defense of it being voluntary should be disregarded or not.
Speaker 3: The judge also honed in several times during this hearing
Speaker 3: on the economic issue. This was brought up by the
Speaker 3: pharma school companies they would be losing large amounts of money.
Speaker 3: He several times alluded to the large profits that these
Speaker 3: farm school companies are making and said that if an
Speaker 3: economic argument was being made, he'd have to have much
Speaker 3: more information on that, and he'd want to know where
Speaker 3: all the money he's going, where all these going, is
Speaker 3: it R and D is it executive compensations, buybacks, et cetera.
Speaker 3: So he was definitely sensitive to that as well as
Speaker 3: part of their argument. You know, the government essentially just
Speaker 3: rested their entire defense on the fact that the part
Speaker 3: that the program is voluntary, and so again I think
Speaker 3: that's going to be a really important fact. They did
Speaker 3: also argue that in the alternative that this did not
Speaker 3: actually even fall under the Fifth Amendment, that this was
Speaker 3: authority that they had under the spending clause, and you know,
Speaker 3: someone like government contractors. There were a lot of parallels
Speaker 3: drawn during this hearing, so that it's not even a
Speaker 3: regulation issue at all. This was a spending one, and
Speaker 3: it just takes it completely out of the Fifth Amendment.
Speaker 3: You know, again, this was long. We didn't really get
Speaker 3: the impression that the judge was convinced, but you know,
Speaker 3: he was actually a pretty great judge. He was very respectful,
Speaker 3: he listened, he asked a lot of questions. So it's
Speaker 3: a little hard to see like how he fell, which
Speaker 3: thought he saw on this one after the whole morning.
Speaker 3: You know, I did mention the Fifth Amendment you process
Speaker 3: earlier as having been an issue that was raised in
Speaker 3: the Astrosenica case, but it really wasn't addressed at all
Speaker 3: during this hearing, even though it was pretty extensively address
Speaker 3: during the briefing, and so you know, I think that
Speaker 3: probably they just chose not the plaintiffs chose not to
Speaker 3: spend a lot of time on that because the judge
Speaker 3: in Delaware ruled on it, which is in the same
Speaker 3: appeal circuit as New Jersey, and so probably they chose
Speaker 3: to spend their time on new arguments to get all
Speaker 3: that on the record during this particular hearing. And an
Speaker 3: interesting argument. I think you and I both thought it.
Speaker 3: This was interesting, Tish is the was the first Amendment
Speaker 3: and the plaintiffs essentially argued that by signing this template
Speaker 3: agreement that CMS has created and requires the companies to execute, right,
Speaker 3: so it's not like they have a choice, you know,
Speaker 3: they're compelled to agree to the negotiated price or the
Speaker 3: maximum fare price, as Dwayne talked about quite a bit,
Speaker 3: which is in the statute, and that is really you know,
Speaker 3: insinuating that previous higher prices and maybe higher prices that
Speaker 3: would be paid for on the private market are in
Speaker 3: fact not fair. So you know this according to the
Speaker 3: FARMAC companies in these lawsuits, just you know, they consider
Speaker 3: that to be sort of an obligation to speak or
Speaker 3: corursive action to speak through disagreement. The companies had argued
Speaker 3: that it makes them essentially have a value judgment on
Speaker 3: what they're charging, and that this is politically motivated and
Speaker 3: it will just make them look bad. And because of
Speaker 3: the excise tax again, which is part of the arguments
Speaker 3: and the Eighth Amendment. You know, they the plaintiffs argued
Speaker 3: pretty much over and over again, this is just a
Speaker 3: false choice. There's not there's no choice here. They are
Speaker 3: compelled to do all of this and it is tarnishing
Speaker 3: to them. So, you know, the government. The government argued
Speaker 3: that this is actually not about the document that CMS
Speaker 3: is drafted, that a compelled speech argument really goes outside
Speaker 3: of the four corners of that document, and that the
Speaker 3: companies are not required to agree publicly on any of it,
Speaker 3: and you know they can they can have amount of
Speaker 3: campaign against CMS if they want to, that is totally fine,
Speaker 3: and that any compelled speech argument would fall outside of that.
Speaker 3: You know, I think that we both thought this was
Speaker 3: a decent argument for plaintiffs. But in thinking about it afterwards,
Speaker 3: you know, if the crux of this argument rests on
Speaker 3: the CMS template, then this particular constitutional challenge is unlikely
Speaker 3: to result in the statute falling apart, because in essence,
Speaker 3: the court can just ask CMS to change their template
Speaker 3: to something that's satisfactory to all parties, and then that
Speaker 3: problem sort of goes away. And then the last one
Speaker 3: I'll touch on is the Eighth Amendment, and that the
Speaker 3: farmers companies essentially argued there that they are imposes remarkably
Speaker 3: high penalties to millions of dollars per day in this
Speaker 3: exercise tax for refusing to participate in these negotiations. And
Speaker 3: you know, we saw this over and over in the
Speaker 3: hearing that each side had vastly different maths calculating what
Speaker 3: those penalties would be pharmacy companies so that it could
Speaker 3: be up to one nine hundred percent of total Dailly revenue,
Speaker 3: while the government, you know, made the point that it
Speaker 3: would never be more than ninety five percent. And so
Speaker 3: we tend to argue, we tend to agree actually with
Speaker 3: the government when we looked at the math. But I
Speaker 3: think it's just you know, how you look at it.
Speaker 3: So the judge did ask quite a bit about that
Speaker 3: and wanted some clarification there. So I imagine that he
Speaker 3: and his clerks will definitely be digging into that a
Speaker 3: little bit more, because that is somewhat the cross over
Speaker 3: the issue. Is it excessive? Are these fines excessive and
Speaker 3: if so, they violate the Eighth Amendment. If not, then
Speaker 3: CMS can impose them according to the statute. As I said,
Speaker 3: are other challenges that under the APA, and several other
Speaker 3: like separation of powers and and things like that that
Speaker 3: are sort of one off in these lawsuits. We do
Speaker 3: actually think that some of the statutory challenges may have
Speaker 3: more teeth, but like I said, these won't result in
Speaker 3: the law falling apart.
Speaker 1: And I mean, I definitely agree with your takeaways from
Speaker 1: the hearing. I think the taking's clause certainly spent a
Speaker 1: lot of time on that. The judge had a lot
Speaker 1: of questions, and you know, the way I view oral
Speaker 1: arguments is really a chance right to clarify any questions
Speaker 1: that the judge has cement your positions, and you know,
Speaker 1: I don't think you'd necessarily walk away with like a
Speaker 1: or maybe maybe the judge didn't either. I don't know
Speaker 1: of a clear picture of Okay, this is the argument,
Speaker 1: but I think that the judge asked the questions he
Speaker 1: needed to ask, was definitely respectful, listen to both sides,
Speaker 1: and there was really a lot to digest, and so
Speaker 1: I think, you know, it'll be interesting to see how
Speaker 1: he ultimately rules on these issues. But that was obviously
Speaker 1: just one small piece of all this litigation. As we
Speaker 1: see up on the side here, and as you've talked about,
Speaker 1: we have a lot of cases going on. We have
Speaker 1: a lot of cases going on at different locations. So
Speaker 1: does location matter here for these various for all these
Speaker 1: various cases, I mean, are there venues that might be
Speaker 1: more amenable to some of Pharma's claims here than others
Speaker 1: or does it not even matter?
Speaker 3: Yeah, I mean I think it matters. It matters for
Speaker 3: two reasons. I think that there are definitely some courts
Speaker 3: that are in states that are more conservative, so then
Speaker 3: we think that it is being more pro business. So,
Speaker 3: for example, the Ohio case I think will be really interesting.
Speaker 3: That was not that did not have a hearing, but
Speaker 3: it's been fully brief since last year, and so you
Speaker 3: know we expected this decision hopefully suit on that and
Speaker 3: that will get that would get appeal to the Sixth Circuit.
Speaker 3: So when you think about how the courts work, you know,
Speaker 3: like I mentioned it earlier that the case the astrodonicy case,
Speaker 3: which is will likely get appealed, but is in the
Speaker 3: same appealette circuit as New Jersey. This isn't going to
Speaker 3: create a split. And a lot of times we think
Speaker 3: about circuit splits and how that sort of pushes the
Speaker 3: Supreme Court to take up a case. And so you know,
Speaker 3: we've all assumed that the pharmaceutical industry has filed in
Speaker 3: these different places so that they can create more incentive
Speaker 3: for this issue to eventually get decided Supreme Court. So
Speaker 3: I think the text there was a tech a case
Speaker 3: in Texas I mentioned that would have been a pretty
Speaker 3: conservative court probably that would get tinned against, you know,
Speaker 3: something like New Jersey or DC. But right now, so
Speaker 3: we're really just watching that Ohio case to see. But
Speaker 3: you know, as long as the courts are in different circuits,
Speaker 3: they'll get appealed, they'll get two appolled decisions. And when
Speaker 3: there's a split in these decisions, and that's like a
Speaker 3: real recipe for Supreme Court taking up that challenge. But
Speaker 3: it doesn't it does matter, But so far we haven't,
Speaker 3: we haven't seen anything sort of stand. So we'll have
Speaker 3: to watch for all these decisions, which we have quite
Speaker 3: a few comings. So it should be interesting.
Speaker 1: Yeah, I agree, I think it's going to be an
Speaker 1: interesting couple of months. Interesting maybe year dealing with the IRA.
Speaker 1: Just real quickly before we wrap up on the IRA
Speaker 1: section and talk about what's next for it. You know
Speaker 1: you've mentioned the AstraZeneca rulings and rulings and other cases.
Speaker 1: Did any of those hearings or the rulings so far
Speaker 1: change your outlook on the case?
Speaker 3: No? Not, not really. I think that it was our
Speaker 3: original take that the medical companies would likely not prevail
Speaker 3: in these challenges. I think that over time we've become
Speaker 3: more convinced of it. But I do feel like this
Speaker 3: New Jersey case, which this was the first case that
Speaker 3: dealt with all of the challenges in their constitution, I
Speaker 3: think that will be a really interesting decision to see.
Speaker 3: But right now we still think the government prevails in
Speaker 3: their lost hands.
Speaker 1: So wrapping up on the lidicationation piece, then, so what
Speaker 1: in your view is next? What are the key things
Speaker 1: you're going to be looking out for over the next
Speaker 1: couple of months here?
Speaker 3: Yeah, So, I mean, besides these summary judgment decisions, one
Speaker 3: of the things we're going to really start looking at
Speaker 3: is and digging into are the statutory challenges, because I
Speaker 3: think after the constitutional challenges are sort of dealt with,
Speaker 3: maybe even appealed. I think that we'll see a lot
Speaker 3: more detail and fight around for the childes, around the APA,
Speaker 3: around what CMS is doing, guidance anything, anything that's just
Speaker 3: non constitutional. I think that will become a little more
Speaker 3: to the forefront, because we've really just been concentrating on
Speaker 3: knocking out this log constitutional.
Speaker 1: Grounds and Dwane, what about you, what's next in terms
Speaker 1: of the IRA for maybe we can start with what's
Speaker 1: next for sort of the twenty twenty six selected drugs
Speaker 1: on the timeline, and then maybe we can talk about
Speaker 1: what's next for the twenty twenty seven price year.
Speaker 2: Yeah, so there's parallel tracks here as we think about
Speaker 2: the first applicable year twenty twenty six, the negotiation processes underway.
Speaker 2: We'll see that process close by August first, prices will
Speaker 2: be published by September first, and then they'll be implemented
Speaker 2: January one, twenty twenty six, assuming no further hiccups. Now,
Speaker 2: while this is happening, we do have CMS beginning or
Speaker 2: collecting price data for that next set of drugs that
Speaker 2: will be subject to negotiation, and that's fifteen party drugs,
Speaker 2: which based on what we talked about earlier, how drug
Speaker 2: has been defined as it's weighty or ingredient. It could
Speaker 2: actually be more than that, but it is a twelve
Speaker 2: month period that ends no later than October thirty first
Speaker 2: of this year. So we're under the assumption that that
Speaker 2: data collection process started to November first, based on expenditures
Speaker 2: starting November one, twenty twenty three, and similar to this
Speaker 2: current process, we'll see the lists come out, we'll see negotiations,
Speaker 2: and then those prices will be implemented January one, twenty
Speaker 2: twenty seven. Now the big question is who's going to
Speaker 2: be on the list, And we just went back and
Speaker 2: looked at what we have from one month of spending,
Speaker 2: and we don't think there's a ton of variation. But
Speaker 2: you can see here the top fifteen to twenty drugs
Speaker 2: that might be selected. Keeping in mind of zembic and
Speaker 2: rebelsis would be under one drug because they share the
Speaker 2: same ingredients, and then you'd have a whole host of
Speaker 2: other drugs as well. So again, as we're watching one
Speaker 2: process play out, we are we are seeing CMS look
Speaker 2: at what the data says in terms of what's next
Speaker 2: for those drugs that will be selected and subject to negotiation.
Speaker 2: So we could see more litigation on the process. Moving forward.
Speaker 1: Now seeking with drug pricing, but switching gears to sort
Speaker 1: of a different program to implement drug pricing. Let's talk
Speaker 1: about the three forty B drug discount program. So, Dwane,
Speaker 1: can you just still listen quickly about what the three
Speaker 1: forty B program is?
Speaker 2: Yeah. So three forty B if the Public Health Services Act.
Speaker 2: It was created in nineteen ninety two with the goal
Speaker 2: of stretching federal resources to reach as many eligible patients
Speaker 2: and provide more comprehensive health care services. A lot of
Speaker 2: stakeholders are affected by this program. Drug makers. If they
Speaker 2: want to be part of the Medicaid Drug Rebate Program
Speaker 2: or Medicaid, they also have to participate in the three
Speaker 2: forty B program. It also impacts pharmacies PBMs, and we
Speaker 2: can get into that in a second, but I think
Speaker 2: it's worth providing some definitional issues first. The entities that
Speaker 2: participate in a three forty B program, referred to as
Speaker 2: covered entities, are those hospitals that I care for a
Speaker 2: disproportionate share of low income or uninsured patients, Medicaid patients,
Speaker 2: some other hospitals like federally qualified health centers, and these
Speaker 2: covered entities can only provide these three forty B drugs
Speaker 2: to quote unquote eligible patients, and that's defined as any
Speaker 2: individual that as a or a patient that has a
Speaker 2: established relationship with the covered entity and has received healthcare
Speaker 2: services from that entity. And so the key with all
Speaker 2: of this is participation in the three forty B program
Speaker 2: generates revenues for these entities, these hospitals or facilities where
Speaker 2: the insurance reimbursement exceeds the acquisition cost or the three
Speaker 2: forty B acquisition costs. While the law doesn't say how
Speaker 2: providers should use the proceeds, in theory, it's supposed to
Speaker 2: go back into the community that they're serving or provide
Speaker 2: assistance to the patients that they're serving. And we can
Speaker 2: go into some of the challenges, but that's kind of
Speaker 2: the three forty B program in a nutshell, And like.
Speaker 1: All programs, we're going to talk about some controversy with
Speaker 1: the program or some you know, challenges to it. So
Speaker 1: in your view, what are the key issues for the
Speaker 1: three forty B program and what sort of policy changes
Speaker 1: were the catalysts for the current controversy that surrounds this program.
Speaker 2: So in a nutshell, growth and transparency and it's the
Speaker 2: way it's affected stakeholders differently. So when you think about
Speaker 2: the number of covered entities I mentioned earlier, we're now
Speaker 2: at fifty five thousand, three forty to B covered entities.
Speaker 2: That's up from eighty one hundred and two thousand. Again,
Speaker 2: I mentioned it initially covered a small subset of hospitals.
Speaker 2: It's actually grown based on other laws after nineteen ninety two,
Speaker 2: such as the Affordable Care Act. We have the role
Speaker 2: of contract pharmacies. At the program's inception, self administered drugs
Speaker 2: could only be dispensed through an in house pharmacy, but
Speaker 2: very few of these covered entities had an in house pharmacy,
Speaker 2: so they couldn't use the discount program for the self
Speaker 2: administered drugs. That was changed in nineteen ninety six where
Speaker 2: the program was allowed to allowed covered entities to use
Speaker 2: an external pharmacy if they didn't have an in house pharmacy,
Speaker 2: and that was further expanded under the ACA where these
Speaker 2: covered entities could contract with an unlimited number of pharmacies
Speaker 2: to provide through forty B discounted drugs. So we then
Speaker 2: saw the number of these contract pharmacies increased to about
Speaker 2: thirty three thousand last year from thirteen hundred and twenty
Speaker 2: ten based on one estimate. And those big players we're
Speaker 2: talking about CBS, we're talking about Walgreens, We're talking about Walmart,
Speaker 2: and when you think about Signa and United Health, because
Speaker 2: they're so vertically integrated, they are also players. Duplicate discounts
Speaker 2: is also an issue where drugs prescribed to Medicaid patients
Speaker 2: are there's a bit of double billing. There's also there's
Speaker 2: the three for to B discount and then the Medicaid rebates,
Speaker 2: and then transparency and accountability, where's the money going? I
Speaker 2: mentioned the discounts and what the intent was, but there
Speaker 2: isn't any documentation as to where the discounts are are going.
Speaker 2: Is it to the patient or is it the community
Speaker 2: where the covered entity is located or somewhere else if
Speaker 2: that hospital is part of a broader or change.
Speaker 1: So, given the growth of the program and the issues
Speaker 1: you just mentioned are questions around transparency and accountability, how
Speaker 1: have the key stakeholders like the drug makers and the
Speaker 1: pharmacies and the hospitals, how have they responded to this?
Speaker 2: So, starting in twenty twenty, drug makers like at VUCP
Speaker 2: engine unilaterally scaled back their participation in the program by
Speaker 2: limiting reporty Beat discounts to more to just one contract
Speaker 2: pharmacy and also requiring it additional data from those contract
Speaker 2: pharmacies on who's being served and where these drugs are going.
Speaker 2: And so in some ways, these drug manufacturers that we're
Speaker 2: providing all these discounts are seeing some kind of tailwind
Speaker 2: from not having to provide those discounts. Pharmacies like CVS
Speaker 2: and Walgreens are impacted differently because as they do a
Speaker 2: couple of things, they administer their claims, they get dispensing fees,
Speaker 2: and so when they have less volume to these restrictions,
Speaker 2: it impacts their revenue and they've you know, one company
Speaker 2: in particular, CBS, has mentioned in their earnings calls about
Speaker 2: how this has affected their outlook, which they now say
Speaker 2: is pretty much annualized. In other words, they have you know,
Speaker 2: they've seen the initial hits the first quarters first year
Speaker 2: in which these restrictions were in place, and they don't
Speaker 2: see an end to that. So we're seeing these companies
Speaker 2: basically say a lot of these changes, unless there's something
Speaker 2: to reverse, it has had an impact on their overall
Speaker 2: top line and Ode.
Speaker 1: You know, Dwayne talked about some of these interilateral steps
Speaker 1: that have been taken by stakeholders, including pharma, and we've
Speaker 1: seen some litigation that's been a result of this. So
Speaker 1: where do we stand with this litigation around the three
Speaker 1: forty B program? You know, what are the arguments and
Speaker 1: what's the status of these cases today?
Speaker 3: Yeah, I mean on this litigation front, it's just cricket.
Speaker 3: You know, we've we've this has been going on a
Speaker 3: lot longer than the IRA litigation. I mean, essentially the
Speaker 3: pharmacuy companies make similar arguments. Is the argument that sort
Speaker 3: of requiring as we mentioned, drug manufacturers to offer discounts
Speaker 3: to contract pharmacies actually violate the APA. So you saw
Speaker 3: that on the IRA as well and the takings clause
Speaker 3: at the Fifth Amendment. And so we've seen one decision
Speaker 3: in a third circuit and I was in favor of
Speaker 3: the pharmaceutical companies. We have two others that were waiting
Speaker 3: on and when I was speaking about the circuit split
Speaker 3: earlier on the IRA case, we'll probably see that and
Speaker 3: then this will ultimately probably also go to the Supreme Court.
Speaker 3: There are two case us right now, one brought by
Speaker 3: Nevades one by Eli Lilly in two different circuits, in
Speaker 3: the Seventh Circuit and in the DC Circuit. And we
Speaker 3: had arguments in both of these cases on appeal over
Speaker 3: a year ago, so October twenty twenty two, and we've
Speaker 3: seen nothing since. So we're hoping that we'll get a
Speaker 3: decision on both of these and then probably likely once
Speaker 3: we do well, poly see appetitions to Supreme Court based
Speaker 3: on those. I mean, we think that ultimately the Thumbs
Speaker 3: companies prevail on this in the end, but you know,
Speaker 3: just still waiting. So this is definitely not a fast
Speaker 3: moving litigation. We've seen much more action in the IRA
Speaker 3: litigations is of late Dwayne.
Speaker 1: You know, given that there's some litigation ongoing here, moving
Speaker 1: slowly is just told us some split rulings. You know,
Speaker 1: has Congress looked at this? I mean, what policy steps
Speaker 1: has Congress proposed? And you know, if so, sort of
Speaker 1: what's the outlook for action by Congress.
Speaker 2: It's been a slow burn. We're seeing, though, increasing noise
Speaker 2: from the Hill about this issue from a couple of angles.
Speaker 2: Last year twenty twenty three, we saw some members get
Speaker 2: together to essentially get feedback from stakeholders on what to
Speaker 2: do from a policy perspective, because I think a lot
Speaker 2: of members realized that doing something might benefit one stakeholder
Speaker 2: at the expense of another. So, as I mentioned earlier,
Speaker 2: this along with patients in the middle, you have pharmacies, PBMs,
Speaker 2: you know, hospitals, you have drugmakers all over are impacted.
Speaker 2: So that effort led to an initial draft legislative proposal
Speaker 2: that was released earlier in twenty twenty four, and it's
Speaker 2: trying to clarify the role of contract pharmacies, what pharma
Speaker 2: can and cannot do in terms of imposing restrictions on
Speaker 2: three point forty B drug discounts, as well as increasing
Speaker 2: data and transparency around what patients are being served and
Speaker 2: where this money's going. Now, I say it's a draft,
Speaker 2: which means we have not seen a an introduced bill
Speaker 2: on this, and given that a selection year, we're not
Speaker 2: going to see much in terms of movements. But I
Speaker 2: will say there's enough interrance where this is being teed
Speaker 2: up for further action in twenty twenty five. I'll note
Speaker 2: that Senator Cassidy Louisiana Republican from Louisiana is ranking member
Speaker 2: on the Health Committee, and he has been sending out
Speaker 2: letters to hospitals and pharmacies about the drug discount program
Speaker 2: and how it is and might not be working. I
Speaker 2: can see that turning into some kind of legislative package
Speaker 2: in the next session. Now, I mentioned center Cassidy because
Speaker 2: he's ranking member. If Republicans get the Senate, he'll be chairman,
Speaker 2: and he'll pretty much guide part of the healthcare agenda
Speaker 2: in a Republican led Senate. So something to keep in
Speaker 2: mind as that process unfolds, as well as this other
Speaker 2: effort by a bipartisan group of members who are trying
Speaker 2: to address the program, but again were in early innings,
Speaker 2: so I don't expect the status quo to change much
Speaker 2: in terms of who's getting impacted by or who's benefiting
Speaker 2: from limiting these discounts in the program.
Speaker 1: That sounds like no matter which way you look at it,
Speaker 1: the legislation or policy, it's going to be a slow churn,
Speaker 1: and we'll probably be talking about this into next year
Speaker 1: given the three forty v program litigation and policy status.
Speaker 1: But you know, switching gears now from pricing, you know,
Speaker 1: just as important as pricing is obviously coverage of therapies
Speaker 1: right and insurance coverage. So let's switch gears and talk
Speaker 1: a little bit about, you know, Medicare coverage expansion, and
Speaker 1: we'll start with obesity. So Duayane, we've heard a lot
Speaker 1: about some positive data for anti obesity drugs and the
Speaker 1: news lately, you know what changes to Medicare are being
Speaker 1: proposed to expand access.
Speaker 2: So right now it's worth remembering what Medicare does and
Speaker 2: doesn't do. Medicare does cover obc screening, behavioral counseling, periatric surgery,
Speaker 2: but health plans participating in the Metro Party program are
Speaker 2: prohibited from covering drugs used for weight loss, and this
Speaker 2: was embedded in the statute when the Party became law
Speaker 2: in two thousand and three as largely because at the
Speaker 2: time we didn't have a GOVI on the market. Obesity
Speaker 2: was viewed as a cosmetic issue that could just be
Speaker 2: addressed through lifestyle changes, and this was around the time
Speaker 2: that some drugs had been pulled from the market due
Speaker 2: to safety concerns. And so fast forward, there's been legislation
Speaker 2: introduced on the Hill to remove that prohibition. It's been
Speaker 2: introduced during the last five congresses of about ten years now.
Speaker 2: Over ten years now that gets more attention because of
Speaker 2: the change and focus of over what obesity is. It's
Speaker 2: not just a lifestyle issue, is not a cosmetic issue.
Speaker 2: And you have these products on the market that are
Speaker 2: showing pretty good effectiveness data. And so with two drug
Speaker 2: now approved by the FA, there's some independent analysis suggesting
Speaker 2: it could produce some overall health health benefits, not just
Speaker 2: lower weights but also other addressing other conditions like diabetes
Speaker 2: and hypertension. But there are some roadblocks that that is
Speaker 2: slowing down these this bill or this effort. One is
Speaker 2: the cost. Keep in mind, these are chronic drugs. You
Speaker 2: don't just take him for a couple of weeks and
Speaker 2: then you go off. The Congressional Budget Office is another roadblock.
Speaker 2: The CBO provides budgetary analysis of potential legislative changes. They
Speaker 2: haven't provided a detailed fiscal analysis of the proposal yet,
Speaker 2: but they have signal that they're looking at what it
Speaker 2: means to expand coverage to or remove the prohibition so
Speaker 2: that more patients can have access to these drugs. And
Speaker 2: CBO hasn't given a recent signal that it's any closer
Speaker 2: to providing a cost projection for doing so. It's it's
Speaker 2: worth noting, and we did some we did some number
Speaker 2: crunching to see what it might mean for the Medicare
Speaker 2: beneficiaries that have an obese diagnosis. What would happen if
Speaker 2: if they had access to these drugs and if we
Speaker 2: just say a small fraction of the thirty percent or
Speaker 2: so that are diagnosed as obest we could see just
Speaker 2: based on waygov and even with the discounts fifteen billion
Speaker 2: in new Medicare spending, which is based on a again
Speaker 2: a fifty percent discount to Novo's with Goovy, but also
Speaker 2: time limited which again they might not be time limited
Speaker 2: because they're chronic disease drugs. For context, at fifteen billion,
Speaker 2: that's about thirteen percent of projected Part D spending in
Speaker 2: twenty twenty four. Higher uptake would affect a number, but
Speaker 2: also there could be offsets if it reduces spending in
Speaker 2: other areas. But I will point out, and this is
Speaker 2: kind of recent news with way GOVI getting FT approval
Speaker 2: for cardio cardiovascular disease treatment, it could end up lowering
Speaker 2: the cost of expanding Medicare to cover OBCA drugs. I
Speaker 2: say that because CBO recently indicated that it expects Medicare
Speaker 2: is going to cover drugs for the treatment of cardiovascular
Speaker 2: conditions for people with obesity, and if so, that means
Speaker 2: covering it for the indication of obesity would be lower
Speaker 2: because some of that new spending for cardiovascular treatment would
Speaker 2: already be baked into the baseline. In terms of what
Speaker 2: is medicare spending or projected Medicare spending. Now, it doesn't
Speaker 2: mean it automatically goes to zero or closer to zero,
Speaker 2: but it is less and it does mitigate the cost
Speaker 2: of expansion. It just doesn't mean we'll see anything. I
Speaker 2: think this year. I would say, as we look at
Speaker 2: a new Congress and a potential big bill in twenty
Speaker 2: twenty five on Trump's tax cuts on ACA funding, maybe
Speaker 2: this could get wrapped up into that proposal. And best
Speaker 2: case scenario is we could see medicare covers in twenty
Speaker 2: twenty seven, twenty twenty eight. But you have to overcome
Speaker 2: a lot of skepticism on the hill that paying for
Speaker 2: an expensive drug that is going to be needed on
Speaker 2: a regular basis, that that can be overcome regardless of
Speaker 2: who's in charge. So it's worth looking into.
Speaker 1: So you know, it's interesting you say, twenty twenty seven,
Speaker 1: twenty eight, potential best case scenario here wouldn't be a
Speaker 1: conversation without talking about the IRA. We talked earlier when
Speaker 1: you were discussing the IRA that at least for Semma, glue,
Speaker 1: tide Ozempic, and Rybelsis they could be on the list
Speaker 1: for twenty twenty seven IRA negotiations. So in your view,
Speaker 1: you know, how would removing the coverage prohibition in this
Speaker 1: best case scenario have maybe IRA negotiation implications here.
Speaker 2: So correct we talked about earlier in the law, there
Speaker 2: is this diff term called single source drug and it's
Speaker 2: been interpreted by CMS as any drug that has the
Speaker 2: same ingredient regardless of whether there's a different NDA or
Speaker 2: BLA for the drug we Gov, Rebelsi's zempic, they all
Speaker 2: have different NDAs. So Zempic was FTY approved in twenty seventeen,
Speaker 2: so it's now eligible or will be eligible for the
Speaker 2: next round of negotiations. And so you could see a
Speaker 2: scenario where even after discounts, we know that we goby
Speaker 2: as a certain cost element, it could be lower if
Speaker 2: Medicare is able to negotiate include agob as part of
Speaker 2: the program. So you know what that might mean, is
Speaker 2: it be a lower price potentially or lower spending it
Speaker 2: would be new spending, so it's still a new cost
Speaker 2: for the part DEEP program, it just might not be
Speaker 2: as much. So it's something that is an interesting fact
Speaker 2: the way CMS has interpreted single source drug and how
Speaker 2: it could play out for high RA implementation.
Speaker 1: And to wrap it up, let's just talk about coverage
Speaker 1: expansion in some other new areas. So can you talk
Speaker 1: briefly just about selling gene therapy and as well as
Speaker 1: Medicare coverage for Alzheimer's therapies.
Speaker 2: Yeah, so just briefly, we're seeing a lot of news
Speaker 2: with seal gene therapy, especially with the FDA approval of
Speaker 2: two sickle cell drugs, and the question is how does
Speaker 2: all of this affordable, not just for patients, but for
Speaker 2: the medicaid program for Medicare. And I'll just say this,
Speaker 2: You know, a couple of things have happened over the
Speaker 2: last couple of years, and it's not just sallenging therapy
Speaker 2: or recognition that these new therapies like CART as well
Speaker 2: need to be addressed from a cost standpoint to make
Speaker 2: them more accessible. And we saw the administration previous administration
Speaker 2: create a new code for CART therapy within the inpatient
Speaker 2: hospital payment system we're seeing this administration look at sealinging
Speaker 2: therapies through a Medicaid model where it negotiates on behalf
Speaker 2: of all states for these new sickle cell drugs in
Speaker 2: theory creating a lower price, but also trying to implement
Speaker 2: this outcome space pricing where you pay when it works. Essentially,
Speaker 2: it's just starting. We're seeing the application process rollout, and
Speaker 2: we could see that program begin in twenty twenty five
Speaker 2: with expansion after that, so stay tuned for that. And
Speaker 2: we're also paying attention to what might happen within the
Speaker 2: Medicare program. As I mentioned, CARTE did get its own
Speaker 2: DRG beginning in twenty twenty. CMS had indicated it was
Speaker 2: looking at a separate DRG for seal enging therapies and
Speaker 2: future rulemaking. So one potential avenue is one code to
Speaker 2: cover patient costs, one to cover product costs across therapeutic
Speaker 2: product categories. That wascal, you're twenty twenty two. Could we
Speaker 2: see something in the upcoming rulemaking or draft proposal for
Speaker 2: impatient payments for hospitals. It's possible, especially in light of
Speaker 2: the FDA approval of these new sickle cell therapy, so
Speaker 2: stay tuned. It's possible. Now to your last question on
Speaker 2: Alzheimer's therapies, so newer therapies and there's a lot of controversy,
Speaker 2: especially around one of them, Aji Home, which has since
Speaker 2: been pulled for the market, but it's set the stage
Speaker 2: for the current national covere determination where medicare covers Alzheimer's
Speaker 2: drugs that receive traditional left the approval when a beneficiary
Speaker 2: is diagnosed with Alzheimer's disease, dementia and as a physician
Speaker 2: participating in a registry, and some of the other aspects
Speaker 2: that go along with that. Now there's a concern and
Speaker 2: have been concerns that person's location may not have the
Speaker 2: number and type of specialists required for ced or covers
Speaker 2: with every evidence development participation, leaving them unable to access
Speaker 2: the drug, and also concerns that the national coverage determination
Speaker 2: might not be reviewed in a timely fashion, even though
Speaker 2: CMS has stated that any future EFTY label updates may
Speaker 2: lead to a reevaluation of the coverage policy. The trick
Speaker 2: here is that any redetermination follows the typical determination process
Speaker 2: or coverage determination process, So it could be that one
Speaker 2: CMS would have to accept the reconsideration requests and two
Speaker 2: it takes about six to nine months for that to
Speaker 2: be completed, so we're probably not going to see any
Speaker 2: changes anytime soon, largely because CMS took a lot of
Speaker 2: heat when I propose this pathway and they still finalized
Speaker 2: that NCD. I don't see unless we see some significant
Speaker 2: evidence in the next couple of years. I don't see
Speaker 2: that changing. Congress has introduced a number of bills not
Speaker 2: necessarily targeted at Alzheimer's therapy, but the NCD process to
Speaker 2: make it faster in terms of changing course, but that's
Speaker 2: unlikely to change anytime soon. So this is an area
Speaker 2: where a lot of the evidence generation will be key
Speaker 2: in terms of how CMS changes its outlook on Alzheimer's coverage.
Speaker 1: With that, we'll wrap up this episode of Votes and Verdicts.
Speaker 1: Thank you to Dwayne and Ode, and of course you
Speaker 1: the listener for joining us today. As always, the research
Speaker 1: on the issues we discussed today can be found on
Speaker 1: the Bloomberg terminal. Have a great day.