Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the Litigation and policy team at Bloomberg Intelligence, the
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Speaker 1: examines intersection of business policy and law. Today's podcast is
Speaker 1: a recording of a webinar on IRA Medicare price negotiations.
Speaker 1: My name is Ode Gersbacher and I am a senior
Speaker 1: litigation analyst covering litigation in the healthcare sector and now
Speaker 1: be your host today speaking with Dwayne Wright, bei's senior
Speaker 1: healthcare policy analyst. One of the products that we have
Speaker 1: due to this election cycle and our entire policy team
Speaker 1: in DC has been looking at different issues that will
Speaker 1: affect that will be affected by the outcome of this allegation.
Speaker 1: And so Dwayne, I'm going to let you provide just
Speaker 1: a quick explanation of what the matrix is before we
Speaker 1: actually dive in.
Speaker 2: Thanks OED and hello everybody. So the Election Matrix what
Speaker 2: is it. It's a tool for clients to track policies
Speaker 2: against different sectors across different sectors, along with the impact,
Speaker 2: timing and likelihood of passage under a Trump or a
Speaker 2: Harris presidency. The matrix has sixty three policies right now,
Speaker 2: it's growing across seven sectors, twenty eight industries, one hundred
Speaker 2: and forty companies. Again, that's likely to grow going forward
Speaker 2: and after the election will update it to reflect the
Speaker 2: incremental changes to policy, impact, probabilities and timing. So, as
Speaker 2: an example, if you want to know more about the
Speaker 2: IRA repeal outlook question that comes up a lot, especially
Speaker 2: as it relates to the healthcare pieces, you'll find our
Speaker 2: latest research notes there. And if you're looking for something
Speaker 2: that's pricing related, such as the three forty B program
Speaker 2: or marching rights, you'll also be able to find that
Speaker 2: there as well. All of this can be found at
Speaker 2: BI Laws at Laws and you just go to that page,
Speaker 2: look on the left hand rail and you'll see a
Speaker 2: tap for the Election Matrix, and you'll also be able
Speaker 2: to find our Litigation Matrix, which is also there and
Speaker 2: you'll be able to see the status of case is
Speaker 2: affecting a lot of the companies we cover.
Speaker 3: So that again that's BI Laws.
Speaker 1: Thanks Dwayne. Okay, so before we get started with what's
Speaker 1: just happened last week with the prices, I did want
Speaker 1: to give a quick update on the multiple litigation that
Speaker 1: the Inflation Reduction Acts many care pricing negotiation provision has
Speaker 1: how that's how that's developed. The sort of crux of
Speaker 1: it so far is that the farm school industry has
Speaker 1: not been able to win a single ish on a
Speaker 1: single issue. The government has prevailed wherever there has been
Speaker 1: a decision. So obviously that's not looking good for the industry.
Speaker 1: But as we know, everything gets appealed and is a
Speaker 1: possible issue that we might see in the Supreme Court.
Speaker 1: There are two cases that I want to point to.
Speaker 1: One is in the DC courts and that is a
Speaker 1: case brought by MERK almost a year ago. There was
Speaker 1: a summary judgment filed. There were some submissions after that
Speaker 1: that amended it, but we are still looking for a
Speaker 1: decision in that court, and that court is looking at
Speaker 1: the First Amendment and Fifth Amendment causes of action. We
Speaker 1: also had a decision in the New Jersey Court where
Speaker 1: there were actually four different cases that were joined together.
Speaker 1: One of those, which is the Novardes case, also looking
Speaker 1: at First Amendment, Fifth Amendment, but also Eighth Amendment. We
Speaker 1: are waiting for that decision. If either of those cases
Speaker 1: go differently from say the case in Ohio which was
Speaker 1: just decided but went for the government, or the case
Speaker 1: in Texas which was decided over a year ago. Now
Speaker 1: we may see a matchup at the Supreme Court eventually,
Speaker 1: but first we have to get through all of the appeals.
Speaker 1: So when we look at everything has been appealed and
Speaker 1: the last couple of cases that will likely get appealed
Speaker 1: regardless of the decision, we're looking at timing of at
Speaker 1: least twenty twenty six for possible Supreme Court decision, So,
Speaker 1: you know, don't we don't see any risk really in
Speaker 1: their short term as like there's a there's somewhat of
Speaker 1: a certainty in our view that these prices are going
Speaker 1: to go into effect, that things are going to go
Speaker 1: as planned for the government, and it will be at
Speaker 1: least a year before we get any inkling that this
Speaker 1: could change. Our view is that it's unlikely that these
Speaker 1: lawsuits would actually take the law down. There might be
Speaker 1: some changes, you know, at the edges, but we've we've
Speaker 1: thought for a while now that it's here to stay.
Speaker 1: So we're sort of monitoring these cases but also going
Speaker 1: with that assumption. Okay, so I will now move to
Speaker 1: the negotiats prices that we've just we've just that we're
Speaker 1: just revealed to us actually last week. But first, Dwayne,
Speaker 1: can you tell us what the factors are that medicare
Speaker 1: used to set these prices so we get a sense
Speaker 1: of how they came up with us.
Speaker 2: As a reminder, when we look at these prices, we
Speaker 2: have to also keep in mind that there was a
Speaker 2: ceiling price, and that's not the price that these manufacturers
Speaker 2: set themselves. It's what's included or in the law. And
Speaker 2: so the starting point is there's a ceiling price.
Speaker 3: So what is the ceiling price.
Speaker 2: It's the twenty twenty one non federal average manufacturing price
Speaker 2: in expine inflation to twenty twenty two. And then based
Speaker 2: on studies we've seen, it's about eighty percent of the
Speaker 2: whack wholesale acquisition cost or list price. And then off
Speaker 2: of that number, you then take a percentage based on
Speaker 2: how long the drug has been on the market. Now
Speaker 2: up to twenty thirty. There are two buckets. There's this
Speaker 2: short monopoly bucket and it's a drug that's been at
Speaker 2: approved or was approved between January one of twenty ten
Speaker 2: and September one of twenty sixteen. And then there's the
Speaker 2: long monopoly bucket where the drug was approved by the
Speaker 2: FDA on or before January one, twenty ten. That percentage
Speaker 2: discount off of the NONFAMP short monopoly drugs is seventy
Speaker 2: five percent, So it's a twenty five percent discount off
Speaker 2: of the NONVAMP. For long monopoly drugs, it's a sixty
Speaker 2: percent discount. Beginning in twenty thirty, there's going to be
Speaker 2: an extended monopoly Category four or drugs on the market
Speaker 2: between twelve and sixteen years, and those drugs will see
Speaker 2: thirty five percent discount off of the non VAMP. And
Speaker 2: so that's the NONFAMP that's not that's not the net price,
Speaker 2: And I should say the ceiling price is basically that
Speaker 2: formula or the lower of the net price. And we
Speaker 2: don't know what the net price is within party because
Speaker 2: that's confidential and there's no floor. So medicare can go
Speaker 2: as low as they want based on the negotiation. There's
Speaker 2: just a ceiling, so below that the agency then uses
Speaker 2: a number of factors to arrive at an MFP or
Speaker 2: maximum fare price. Two buckets to think about to guide
Speaker 2: the process. There's manufacture specific data and then evidence about
Speaker 2: alternative treatments. So within that manufacture specific data which is
Speaker 2: provided by manufacturers during theciation process, r and D costs
Speaker 2: or the manufacturer and to the extent that the r
Speaker 2: and D has been recouped, current unit costs of the
Speaker 2: production and distribution of the drug, whether there's been any
Speaker 2: financial support or the discovery of the drug, Any information
Speaker 2: on pending our proved patent applications, and then market data
Speaker 2: around revenue and sales volume for the drug. The public
Speaker 2: can also provide data as well which will also plan
Speaker 2: to this specifically for the second bucket, which is evidence
Speaker 2: about alternative treatments, and that includes the extent which the
Speaker 2: drug is a therapeutic advanced compared to other alternatives or
Speaker 2: therapeutic alternatives, prescribing information approved by the FDA for the drug,
Speaker 2: comparative effectiveness research of the drug compared to alter So
Speaker 2: there are a number of avenues in which CMS or
Speaker 2: Medicare is able to figure out or arrive at a
Speaker 2: at a price, especially or at these prices that we
Speaker 2: see on see or provided by Medicare, But how they're
Speaker 2: weighted we don't know. And I think it's fair to
Speaker 2: say that this administration may very well wait some of
Speaker 2: these factors differently than any future administration.
Speaker 1: So Dwin, do you think that we'll have more information
Speaker 1: at some point on how Medicare did weigh each factor
Speaker 1: for this so that we can have more productability for
Speaker 1: the future.
Speaker 2: By law, yes, So Medicare Agency has until March first,
Speaker 2: I believe, twenty twenty five to provide an explanation of
Speaker 2: the MSP for each drug. And this is where CMS
Speaker 2: will make public all the data provided by manufacturers and
Speaker 2: the public that are considered non proprietary. They will not
Speaker 2: be sharing any proprietary information, and it'll be an explanation
Speaker 2: based on many of the factors I mentioned earlier. Now
Speaker 2: it is possible CMS will announce the explanation earlier, especially
Speaker 2: when you think about and we'll go into this later.
Speaker 2: The next set of drugs that will be selected will
Speaker 2: be in February. I'll also note that CMS is not
Speaker 2: going to make public the R and D costs reported
Speaker 2: by the primary manufacturer, since again that's proprietary, so they
Speaker 2: may have some general statements about whether or not the
Speaker 2: manufacturers recouped it's our D costs.
Speaker 3: Now.
Speaker 2: I think one other question that comes up is, and
Speaker 2: this is something I've written about and I've used the
Speaker 2: word manageable, is this Are these cuts really manageable? I
Speaker 2: think ultimately the companies know better, but I think when
Speaker 2: you step back and take a look at these drugs
Speaker 2: that were first selected, the first ten they're on this list,
Speaker 2: it's probably at least initially manageable. One these are already
Speaker 2: highly rebated drugs or they're facing patent expiration or generic
Speaker 2: competition very soon. Now, over time, as more drugs from
Speaker 2: these companies are selected or probably have more of an
Speaker 2: impact on companies and will likely affect R and D
Speaker 2: strategies and life cycle management moving forward. And keep in mind,
Speaker 2: the law doesn't have or doesn't say anything about launch prices,
Speaker 2: so the expectation is and the Congressional Budget Office, which
Speaker 2: provides estimates for new policies, does believe that the law
Speaker 2: because there's no cap on launch prices and because of
Speaker 2: the limits on what these companies can do in terms
Speaker 2: of raising prices each year, and the fact that their
Speaker 2: monopoly pricing power has been limited, we may see more
Speaker 2: of these of more prices or more drugs launched at
Speaker 2: a higher price moving forward. So to your early question,
Speaker 2: when we know more March at the latest, but we
Speaker 2: could no sooner.
Speaker 1: Okay, So looking at this list, if I look at
Speaker 1: the list, still are jumps out because I know that
Speaker 1: there are some FDA approved biosimilars. So Jimney Insights to
Speaker 1: y was selected. And how long well the medicare prices,
Speaker 1: I mean, how long will take for those to be implemented?
Speaker 2: Yeah, So this is a good case study question and
Speaker 2: a good way to kind of understand how the IRA works. Now,
Speaker 2: keep in mind, to be selected, it has to be
Speaker 2: a combination of a number of things. One, does the
Speaker 2: jarger biologic cabbage generica buy similar on the market. If
Speaker 2: it does, then it does not qualify or it cannot
Speaker 2: be selected. Is the gross spending for that drug does
Speaker 2: it make it one of the in this case, the
Speaker 2: top ten party drugs that are eligible. And then two
Speaker 2: or three has the product been on the market for
Speaker 2: seven or eleven years? Seven for a small molecule, or
Speaker 2: eleven for a large molecule. Now, when you get past
Speaker 2: all of that, timing is a key issue. So to
Speaker 2: your point, yes, there are three FD approved biosimilars to Stellara,
Speaker 2: but the key here is they weren't marketed in time
Speaker 2: to prevent the drug from still from getting selected, which
Speaker 2: was August twenty twenty three, and then the biosimilars were
Speaker 2: not marketed before the end of the negotiation period, which
Speaker 2: was first just a couple of weeks ago. The three
Speaker 2: biosimilars will be marketed at some point later this year
Speaker 2: or early twenty twenty five, and so that kind of
Speaker 2: gives you a sense of okay. Even if a drug
Speaker 2: is going to face generic competition, doesn't necessarily mean it's
Speaker 2: going to be exempt from getting selected, but it could
Speaker 2: prevent a MFP from going into effect. Now, another thing
Speaker 2: to keep in mind, if a biosimilar generic does come
Speaker 2: to market during the negotiation period, the MFP does not
Speaker 2: go into effect and the new drug won't or won't
Speaker 2: be replaced by a different drug. If the generica buy
Speaker 2: similar enters the market during the first three months of
Speaker 2: the price applicability, which in this case for this list
Speaker 2: is March thirty first, twenty twenty six, then the Medicare
Speaker 2: price remains in effect.
Speaker 3: For that year.
Speaker 2: If the competition comes in after April first, twenty twenty six.
Speaker 2: In this example, the price remains through twenty twenty six
Speaker 2: and through twenty twenty seven. CMS will have to determine
Speaker 2: whether there's legitimate biosimilar or generic marketing, and it's not
Speaker 2: just a token market on the presence on the market
Speaker 2: to get that brand product pulled from the program. So
Speaker 2: in guidance, people may remember that CMS came up with
Speaker 2: this term called bonafide marketing or bonified generic marketing.
Speaker 3: That's not in the law.
Speaker 2: It is just one way that CMS is interpreting the
Speaker 2: law and a mechanism it's using to ensure that you know,
Speaker 2: there aren't any games being played in terms of enabling
Speaker 2: these brand products from getting not getting selected, or getting
Speaker 2: off the list sooner than they should.
Speaker 1: Okay, so you can't have a biosimilar and not market
Speaker 1: it and still be off the off the list.
Speaker 2: Right the way it's been interpreted by CMS, I think
Speaker 2: it may be written one way, and I think that
Speaker 2: that's where some criticism comes in, but at least based
Speaker 2: on current interpretation by CMS, which could change because they're
Speaker 2: going to issue guidance EAT for each applicable year. There
Speaker 2: they're going to be looking at whether there's a sufficient marketing,
Speaker 2: there's been sufficient marketing of a drug, and there's they've
Speaker 2: also thrown in a totality of the circumstances to get
Speaker 2: to that point. And my view is that can mean
Speaker 2: just about anything.
Speaker 1: Okay, So if we just think about the Stellara example
Speaker 1: for future biologics that may have biosimilars high on their tail,
Speaker 1: can can you maybe think about what from companies could
Speaker 1: do differently? Obviously when Selara was first sold, this wasn't
Speaker 1: even a thought, but go going forward, any company that
Speaker 1: has a biologic, is there anything that that company could
Speaker 1: do so that they prevent these price cuts?
Speaker 2: Yeah, So again Selara is a great example to help
Speaker 2: explain the law. So there is a biosimilar delay exemption,
Speaker 2: and it's a provision that lets the maker of the
Speaker 2: potential negotiated drug to get a pass for one year.
Speaker 2: They can get an additional year if there's a high
Speaker 2: likelihood that a biosimilar and will enter the market in time.
Speaker 2: But in the case of Stillara, that loophole didn't apply
Speaker 2: because it is only available for drugs that have been
Speaker 2: on the market or between twelve and sixteen years, in
Speaker 2: other words, extended monopoly drugs. Stillara was approved in two
Speaker 2: thousand and nine and therefore didn't qualify that. The cutoff
Speaker 2: for this round was January January one, twenty ten, and
Speaker 2: again Stillara was proved two thousand and nine. If it
Speaker 2: had and the biologic manufacturer would have had to apply
Speaker 2: for this not be biosimilar, Medicare would have to be
Speaker 2: convinced that biosimilar competition is looking fairly reasonable, and you know,
Speaker 2: look at patent challenges, exclusivity issues and all those things
Speaker 2: of making a determination of whether the biosimilar delay is warranted.
Speaker 2: So when we look ahead for the next round of
Speaker 2: drugs that will be selected, the biosimilar delay will be
Speaker 2: available for drugs that were marketed before January one, twenty eleven.
Speaker 2: And you know, we'll go into this later, but that
Speaker 2: might not be a whole lot of examples, given that
Speaker 2: we'll probably looking at small molecule drugs, but it could
Speaker 2: mean a big deal for companies in twenty twenty eight
Speaker 2: when Part B drugs start coming outto the market.
Speaker 1: Okay, and so are these prices just set for the
Speaker 1: foreseeable future until the drug comes off the list, or
Speaker 1: is there a certain process where they can get renegotiated
Speaker 1: or change over time.
Speaker 2: Yeah, so two things. One for each year after the
Speaker 2: first initial price applicability year in this example twenty twenty six.
Speaker 2: Beginning twenty twenty seven, CMS will publish an updated and
Speaker 2: negotiated price and that is basically the price updated by
Speaker 2: CPI CPIU to be precise, So there's an inflation index
Speaker 2: that's not tied to healthcare, it's just overall CPI. The
Speaker 2: other piece is the there is a renegotiation process. And
Speaker 2: now there isn't a whole lot of detail in the
Speaker 2: IRA text about the negotiation process, but the Medicare Agency
Speaker 2: is tasked with coming up with this process, which will
Speaker 2: start in twenty twenty eight. Renegotiation is available where drug
Speaker 2: has a a selected drug as a new indication or
Speaker 2: a change of status to an extended monopoly drug or
Speaker 2: from extended moopoly to a long monopoly drug based on
Speaker 2: how long it's been to market on the market. And
Speaker 2: then there's this broad category that is up to CMS
Speaker 2: discretion where there's been some material change to the product
Speaker 2: based on unit costs of production, market sales, market data
Speaker 2: and sales volume, or new comparative effectiveness research relating to
Speaker 2: therapeutic alternatives for example. Again that's up to HHS. CMS
Speaker 2: has not provided information on the negotiation process. They didn't
Speaker 2: during last years initial guidance because that applies to twenty
Speaker 2: twenty six. They did not provide any additional information this
Speaker 2: year for the draft guidance because that's for twenty twenty seven.
Speaker 2: They have signal they'll provide more detail in the next
Speaker 2: guidance for twenty twenty So we're looking forward to seeing
Speaker 2: what that might be. For drugs in twenty twenty eight.
Speaker 2: What are those drugs that might be affected. And this
Speaker 2: is a broad brush and we need to keep in
Speaker 2: mind generic entry could play a role. A lot of
Speaker 2: these drugs are seeing patent expirations, so that's also something
Speaker 2: to keep in mind. But I'm looking at six Zerelto
Speaker 2: by Jane Jay in twenty twenty eight. In terms of
Speaker 2: renegotiation Eloquist Brstill Meyers twenty twenty nine and Bruvka Mabb
Speaker 2: twenty thirty. Barcica by Astrazenica in twenty thirty one. Jardians
Speaker 2: by Lilian twenty thirty one and Intrusto by Novars in
Speaker 2: twenty thirty two. Again going back to an earlier comment,
Speaker 2: some of these drugs have patent expirations, for example Zerelto
Speaker 2: in twenty twenty five and trust To and Farciga. And
Speaker 2: I know that there's ongoing litigation challenges where we could
Speaker 2: see Generica buy similar competition. So the renegotiation process might
Speaker 2: not matter for them, but it might matter for others
Speaker 2: where they don't anticipate any kind of competition until much
Speaker 2: much later. So these prices are not static.
Speaker 1: They can change, okay, And so do all Medicare beneficiaries
Speaker 1: have access to these drugs at these prices?
Speaker 2: Well, yes, by law, drum makers with a manufacturing manufacturer,
Speaker 2: I'm sorry, maximum fair price are required to make prices
Speaker 2: available to Medicare beneficiaries and mail order services part plans
Speaker 2: and Medicare Advantage part plans must include drugs on their formulary,
Speaker 2: but CMS guidance doesn't require favorable placement. In other words,
Speaker 2: there's no guarantee that these drugs will we place on
Speaker 2: the formula in preferred position versus a non preferred position,
Speaker 2: or won't have other requirements UH placed on them that
Speaker 2: might limit patient access. So, based on some of the
Speaker 2: research we've seen about some of the formula lary lists
Speaker 2: and where these drugs are covered, how they're covered, nearly
Speaker 2: all beneficiaries have coverage for a majority of the drugs,
Speaker 2: looking at Intrusto and Bruvca, Aloquist, Tridience, Zerelto and Mbrel.
Speaker 2: Maybe less coverage for some others Genuvia, Parsica, Stellara, and NovoLog.
Speaker 2: Most are on the preferred tier or the specialty tier
Speaker 2: that latter parts in Edinbrel and Brufica and Stellara, and
Speaker 2: so from a better fishery standpoint, the MFP could very
Speaker 2: well mean lower co insurance for the beneficiary because typically
Speaker 2: consurance is tied to the list price, not the net price.
Speaker 2: Now to my earlier point about a CMS or the
Speaker 2: law requires these drugs to be on formulais, but CMS
Speaker 2: does not require them to be in a particular position
Speaker 2: or does not determine or state or require any certain
Speaker 2: level of access. It does remain to be seen how
Speaker 2: part deep plans will manage the tiering for these drugs
Speaker 2: now that rebates are no longer available. For example, we
Speaker 2: just looked at two drugs Genuvia, where there are some
Speaker 2: direct substitutes, which could include the Ringer Engelheim's Tragenta and
Speaker 2: Tacato's Asina. Both alternatives have a higher net price based
Speaker 2: on our estimates which we looked at Medicare Payment Advisory
Speaker 2: Commission data on potential rebates, so those might be more
Speaker 2: appealing than the MFP drug Genuvia in this case since
Speaker 2: it rebates won't be available. Another example Aloquist and Zerelto,
Speaker 2: which is an interesting example because you have two drugs
Speaker 2: in the same class there that have an MFP and
Speaker 2: some other drugs that don't. And just as a reminder,
Speaker 2: within Part D there is a requirement that two drugs
Speaker 2: from each class must be covered, and so you know
Speaker 2: what happens where you have eloquisenceerelto with a maximum fair
Speaker 2: price versus those without but they have rebates. That'll be
Speaker 2: interesting to see and we'll know more next year as
Speaker 2: these plant formularies come out, but it will also be
Speaker 2: interesting to see if there's a step up in utilization
Speaker 2: management restrictions like except therapy, quantity, quantity limit and prior off. Again,
Speaker 2: Medicare has signaled that it will review formulaies to ensure
Speaker 2: that they aren't discouraging beneficiaries from enrolling in certain place lands,
Speaker 2: and the doors open for new requirements to ensure that
Speaker 2: beneficiaries have access. So it's too early to say, but
Speaker 2: these are some things to keep in mind in terms
Speaker 2: of yes, we know what the price is, and we
Speaker 2: have an assumption about what the take up rate has been,
Speaker 2: utilization has been for beneficiaries, but with all these moving parts,
Speaker 2: we can't just assume it's going to be the same
Speaker 2: given some of the incentives and maybe disincentives for putting
Speaker 2: these drugs in a preferred position on the formulas.
Speaker 1: Okay, so then looking ahead, you know what drugs are
Speaker 1: you watching that you think might provide some clues for
Speaker 1: future negotiations.
Speaker 2: Yeah, so the one drug I was looking at in
Speaker 2: particular when the prices came out was in Bruvaca, which
Speaker 2: is Jensen And have these cancer drug I mentioned earlier
Speaker 2: requirement that part plans have to include two drugs in
Speaker 2: each class. The exception is if you're in a protected
Speaker 2: class and there are six of them in medicare, where
Speaker 2: all drugs in the class must be covered by a
Speaker 2: party plan. Now, typically again only two per therapey class,
Speaker 2: and as a result, because they must be covered, they
Speaker 2: typically don't come with large rebates like you would see
Speaker 2: over fifty percent rebates for insulin products because of one,
Speaker 2: there are many and then two it's not a protected class. Now,
Speaker 2: in setting our projected MFPs, we use some of that
Speaker 2: MedPAC data and we assumed a ten percent Medicare rebates
Speaker 2: at least. Again, these are confidential, but that's what we
Speaker 2: were assuming. We have plans we're getting in the market now.
Speaker 2: When you look at the final prices Medicare released on
Speaker 2: August in mid August, the Medicare price as a share
Speaker 2: of the list price was higher than the rest of
Speaker 2: the negotiating drugs, and the Medicare price as a share
Speaker 2: of the net price was also high. Wasn't higher than
Speaker 2: some of the other drugs like eloquist and Zerelto, but
Speaker 2: the combination of the two was interesting to me. So
Speaker 2: what might suggest potentially a light touch for protected class drugs,
Speaker 2: particularly the cancer drugs That could be important for the
Speaker 2: next several rounds because we do protect Potentially five canter
Speaker 2: therapies will be selected for price cuts beginning in twenty
Speaker 2: twenty seven, and we're looking at advisors e Standy, potentially Ibrandts, Bristol, Myers, Pummelist, Burgers,
Speaker 2: O feb and Astra, Zeneca's Calquins. And then again you
Speaker 2: know twenty twenty eight Art B drugs will coming to play. Now,
Speaker 2: another thing to keep in mind, there's no formula for
Speaker 2: setting the Medicare price and a different administration can wait
Speaker 2: factors differently when getting to that endpoint. But the initial
Speaker 2: round could be promising if you're considering price cuts or
Speaker 2: worried about price cuts that might be severe for certain
Speaker 2: therapeutic classes. I'll also want to point out drugs with
Speaker 2: an MFP could be a price point for future drugs
Speaker 2: going through the program, And I mentioned a couple in
Speaker 2: the cancer space earlier. So when you think about the
Speaker 2: ones that were picked this year and some others like
Speaker 2: diabetes drugs, those with an MFP for starting twenty twenty six,
Speaker 2: that could very well play into how the maximum fair
Speaker 2: prices are set for some of those drugs that will
Speaker 2: be up for negotiation.
Speaker 1: Okay, thanks for that. So just going back, as we
Speaker 1: mentioned the election beginning of this, do you think that
Speaker 1: the Drug Pricing Provision rus on the election outcome? Does
Speaker 1: it matter or do you think it's just a status
Speaker 1: quo right now on the election on drug pricing.
Speaker 2: Yeah, so that's a good question, because this is an
Speaker 2: interesting election in the standpoint of the Republican candidate.
Speaker 3: Isn't your typical.
Speaker 2: Friend of pharma or at least is willing to go
Speaker 2: to a place where the industry is more regularly like
Speaker 2: what a Democrat would typically do and Trump is. That's
Speaker 2: the only way of saying Trump is no friend of
Speaker 2: the industry. And if people are thinking of if Trump wins,
Speaker 2: then there's going to be a lot of touch. I
Speaker 2: wouldn't be so sure.
Speaker 3: Now.
Speaker 2: I nobody has any way of knowing, since only Trump
Speaker 2: knows what he's going to do. But I think as
Speaker 2: a broad broad brush, now the candidate is a friend
Speaker 2: of the drug industry. Candidate Trump in twenty sixteen supported
Speaker 2: government negotiation of drug prices. He backtracked when House Democrats
Speaker 2: passed their own bill, but then later supported setting prices
Speaker 2: for some high cost part B drugs to those overseas.
Speaker 2: He still supports the proposal, at least based on his
Speaker 2: agenda forty seven websites, but has it really given it
Speaker 2: much airtime or given the issue much airtime point being
Speaker 2: this is all speculation. Don't expect Trump to necessarily follow
Speaker 2: through on the mandates to not fall, So I should
Speaker 2: say over the next four years, in other words, announcing
Speaker 2: the next drug subject for negotiation, which is due by
Speaker 2: February first.
Speaker 3: Setting maximum fair prices.
Speaker 2: In fact, I could see a scenario where he pushes
Speaker 2: for deeper discounts than what was achieved with this first round,
Speaker 2: claiming that he is the master negotiator and can do better.
Speaker 2: So I think that from a repeal standpoint, I'm not
Speaker 2: convinced that's on the table. I think it'd be pretty
Speaker 2: hard for let's just say Republicans run the table for
Speaker 2: Republicans to repeal it, because you know, they will know
Speaker 2: that there are lower prices because they've been announced, and
Speaker 2: there are other aspects like the cap on how to
Speaker 2: pocket costs that the public views as favorable. Now, what
Speaker 2: if Harris wins, Well, I think it would have will
Speaker 2: be if she wins, it will be the same as
Speaker 2: if Biden had been running and had been re elected,
Speaker 2: more of the same status quo we've seen in the past.
Speaker 2: The Biden administration has put out a budget that would
Speaker 2: double the number of drugs subject to negotiation. So in
Speaker 2: twenty for twenty twenty seven, that'll be fifteen and twenty
Speaker 2: twenty fifteen also, but that will include Part B and
Speaker 2: party drugs, and then in twenty twenty nine twenty drugs.
Speaker 2: So doubling is thirty, thirty and forty. Now is this realistic?
Speaker 2: Well to do that, Congress would need to step in
Speaker 2: and make the change. Unclear even if Democrats win the
Speaker 2: White House, if they'll control the Senate and the House
Speaker 2: or or just one unlikely that Congress is or Republicans
Speaker 2: will go along and do that. And the other point
Speaker 2: is if Democrats could get that, they probably would have already.
Speaker 2: Remember they had complete control of Congress when the iras passed,
Speaker 2: but many of the drug pricing provisions are watered down.
Speaker 2: So I think even if Democrats manage to run the
Speaker 2: table and keep the White House and the Senate and
Speaker 2: get the House, I'd be very skeptical. And I also
Speaker 2: flagged that this provision is part of the Democrats platform
Speaker 2: that was just released. So I think to your earlier question,
Speaker 2: it's probably a lot of headline noise about changes to
Speaker 2: the law, but probably not a whole lot of legislative
Speaker 2: fixes that completely overhaul the program.
Speaker 1: Okay, but do you think that there could be modest
Speaker 1: tweaks that could pass. I guess regardless of who wins
Speaker 1: the election.
Speaker 2: I think that is possible. And we kind of have
Speaker 2: to answer the question. Is there a path for any
Speaker 2: legislation to pass in the next Congress? And there's always
Speaker 2: something where a healthcare provision can get attached, And looking
Speaker 2: ahead of the next eighteen months, that's probably going to
Speaker 2: be the debt ceiling fight. Probably less likely since that'll
Speaker 2: be early in the next administration. We also have the
Speaker 2: expiration of the Trump tax cuts at the end of
Speaker 2: twenty twenty five, so that could be a pathway where
Speaker 2: a whole bunch of policies are attached to one massive
Speaker 2: tax bill.
Speaker 3: What are those policies? One that comes.
Speaker 2: Up is parity. And when I say parody, remember that
Speaker 2: small molecules are eligible for negotiation or it can be
Speaker 2: selected after seven years of FTY approval large molecules eleven.
Speaker 2: There's some concern expressed by drug makers and some on
Speaker 2: Capitol Hill that that could disincentivize development and research into
Speaker 2: small molecules. You know, just keep in mind pharma companies
Speaker 2: did push for longer exclusivity periods for biologics as a
Speaker 2: means to protect their investment in promote innovation, and that
Speaker 2: was all part of the Affordable Care Act, and so
Speaker 2: it's not new to have this kind of difference or distinction.
Speaker 2: But I think there is some concern by many that
Speaker 2: the way it's written into the IRA and how that
Speaker 2: could affect prices. There might be some reason to make
Speaker 2: both eleven years as opposed to one with a shorter runway.
Speaker 2: I'm not as convinced that we're going to get there
Speaker 2: in the next year and a half. I think we'll
Speaker 2: need more evidence to get a sense of Okay, this
Speaker 2: law is really changing the way drug manufacturers are pursuing
Speaker 2: certain therapies now. There is one area I think that
Speaker 2: could be ripe or more ripe for discussion and a
Speaker 2: potential tweak. It's around orphan drugs. And keep in mind
Speaker 2: there's an orphan drug exemption in the law, which basically
Speaker 2: says if it's an orphan drug with one designation, then
Speaker 2: it's exempt from price cuts or the IRA. Y Medicare
Speaker 2: has interpreted that as well. If you are designated for
Speaker 2: if you're an oprom drug and you're designated for an
Speaker 2: additional disease, then you even if you're not an FT approved,
Speaker 2: but if you're designated, you lose the exemption number one,
Speaker 2: and then the clock doesn't start when you lose the exemption.
Speaker 3: It start.
Speaker 2: Did I guess when you initially had FT approval for
Speaker 2: that initial orphan orphan drug or when that drug for
Speaker 2: the orphan disease was approved. So we could see fixed
Speaker 2: legislation around maybe allowing for multiple orphan designations or more
Speaker 2: multiple rare diseases or conditions, and then potentially starting the
Speaker 2: clock when the orphan product loses its exemption as supposed
Speaker 2: to going back in time. So I think those are
Speaker 2: the two that will probably get the most attention, and
Speaker 2: I think the orphan drug provision is probably the one
Speaker 2: that might have the most legs, largely because we're looking
Speaker 2: at drugs that are treating very rare diseases.
Speaker 1: Okay, so is there anything else that you think we
Speaker 1: should know about on the negotiation process moving forward?
Speaker 2: Well, just as we're finishing up this first round, Granted,
Speaker 2: the prices don't go into effect until January one, twenty
Speaker 2: twenty six, and we won't know the reasoning behind the
Speaker 2: prices for the first vetch of drugs until at the
Speaker 2: latest March of twenty twenty five. There's a whole new
Speaker 2: process starting in twenty twenty five, and the you know
Speaker 2: a Harris or Trump administration has to publish the next
Speaker 2: set of fifteen party drugs that'll be subject to negotiation
Speaker 2: by February one, and I'll know, my thinking is if
Speaker 2: Trump wins, I wouldn't be surprised if on the way
Speaker 2: out the Biden administration puts out that list early in January,
Speaker 2: keeping in.
Speaker 3: Mind how they'll arrive at.
Speaker 2: What that list is, it's based on Medicare are despending
Speaker 2: gross spending, not net gross spending between November one of
Speaker 2: twenty twenty three and October thirty first of this year,
Speaker 2: so there's still a couple more months to play out,
Speaker 2: but that that is going to be used to rank
Speaker 2: order the next set of fifteen drugs. Again, that's due
Speaker 2: by the latest February twenty twenty five, and then there's
Speaker 2: this whole negotiation process during the next year, and we'll
Speaker 2: see the prices for those drugs published at the end
Speaker 2: of November twenty twenty five to come to effect twenty
Speaker 2: twenty seven. And I'll add that that framework of announcing
Speaker 2: the new drugs and the announcement of the the prices
Speaker 2: for their drugs will be the framework of the timeframe
Speaker 2: for every year thereafter. So as much as I'm talking
Speaker 2: about the twenty twenty seven drugs or drug class, that's
Speaker 2: the framework for twenty twenty and thereafter. So we'll still
Speaker 2: be unpacking what the first ten drugs might mean for
Speaker 2: companies over the next couple of months, but we're also
Speaker 2: looking ahead to the next set of fifteen drugs that
Speaker 2: might make the list, and we'll know more about what
Speaker 2: that list might be in February.
Speaker 1: Okay, all right, thank you so much. Doing this is
Speaker 1: a lot of information, really interesting that wraps it up
Speaker 1: for us. If you do have any questions, please reach
Speaker 1: out to us directly. Thank you very much.