Pharmaceutical company chief executives who are suing to block the Biden administration’s Medicare price negotiation law have told shareholders and analysts that the final price proposals will not have a significant impact on their companies’ profits.
Comments from executives at companies including Pfizer, Bristol-Myers Squibb, Johnson & Johnson and AbbVie suggest the price cuts may not be as sharp as many in the industry initially feared.
But executives remain adamant that Medicare price negotiations under the Inflation Control Act, which expires Thursday, will stifle innovation in the long run, and said they hope a new administration or industry lawsuits will bring an end to the policy.
The IRA bill “would be a huge loss for innovation and for the life sciences technology business, the crown jewel of American industry,” Pfizer CEO Albert Bourla said Tuesday, “but this is the reality. This is the law of the land. And we’re doing our best to minimize any impact, especially going forward.”
Companies that make the 10 drugs subject to price negotiations have been exchanging proposals with the federal government since February.
The official end of the negotiation period is August 1, but the two companies say they already have final proposals in hand, with a firm price to be announced by September 1 and take effect in 2026.
According to the Biden administration, the first 10 drugs selected for negotiations will result in $3.4 billion in out-of-pocket costs for an estimated 9 million Medicare enrollees in 2022.
The law requires that small molecule drugs such as pills must be on the market for at least nine years, compared with 13 years for biologics, which are often administered by injection or infusion.
“Now that we know the final price, we are increasingly confident in our ability to navigate the impact of IRAs on Eliquis,” Bristol-Myers Squibb CEO Chris Varner said on an earnings call with analysts on July 26.
Eliquis, the company’s blockbuster blood thinner, has a list price of $594 per month. Medicare will spend about $16.5 billion on Eliquis in 2022-2023, more than any other prescription drug, according to the Biden administration.
Still, Boehner stuck to the industry’s position that price negotiations constitute illegal government price fixing.
“Regardless of short-term trends, we are very concerned about the long-term impact of the IRA on innovation, because we continue to believe that arbitrary government pricing of life-saving medicines is not good public policy,” Boehner said.
Many of the drugs on the original list face generic competition and are nearing the expiration of their patent monopolies, meaning that their prices would likely be reduced even without the law, and so they will not be included in the next round of negotiations.
Chris Meekins, a health policy analyst at Raymond James, said drugmakers either accurately predicted what the negotiated prices would be or thought they could offset the price cuts with price increases on other products.
But the public won’t know what strategy the companies have adopted until the final prices are announced, Meekins said.
“Whenever there’s a policy change, companies are almost always very good at finding ways to minimize the pain of the change, and that’s exactly what pharmaceutical companies are doing,” he said.
Larry Levitt, executive vice president of health policy at KFF, said it stands to reason that the impact of the law may be muted, at least initially.
“Because price negotiations only apply to Medicare and this first round only affects 10 drugs, it’s not too surprising that they won’t have a significant impact on big pharma’s bottom lines at this point,” Levitt said.
But “this isn’t the first time a company has said the sky is falling on Capitol Hill while projecting optimism on Wall Street,” Levitt added.
Several pharmaceutical companies, as well as major industry trade associations PhRMA and the U.S. Chamber of Commerce, have sued the Biden administration to block implementation of the price negotiation provisions.
Most of the lawsuits have failed, but PhRMA has filed appeals to the 5th Circuit Court of Appeals, considered one of the most conservative courts in the nation and with a history of ruling against the Biden administration.
Executives declined to comment on actual prices but said they were factoring the impact of IRAs into their positive growth assessments.
AbbVie Chief Executive Officer Robert Michael said on a conference call last week that the company’s guidance has factored in a hit to sales of Imbruvica, a leukemia drug it developed with Johnson & Johnson.
“We’ve said publicly that we modeled the impact and still expect to be able to achieve our long-term outlook,” Michael said.
Michael added that price negotiations “will certainly have a negative impact on long-term innovation” and said he is “expectant” that the new administration will “reevaluate” these provisions of the law.
Teva President and CEO Richard Francis delivered a similar message Wednesday about Austed, a drug that could be subject to the next round of negotiations, which take effect in 2027.
The company has a sales target of $2.5 billion for the drug in 2027, which includes the impact of IRA negotiations, he said.
J&J executive Jennifer Taubert said on July 17 that the company was “not consistent with its IRA and pricing process.” Still, the government’s final numbers “were included in the guidance and remain very good for us today.”
J&J has two drugs on its negotiation list: the psoriasis treatment Stelara and the blood thinner Xarelto.
Meekins said executives have an incentive to downplay the potential impact to avoid upsetting shareholders and causing stock prices to crash, but that could become problematic if a Democratic Congress and administration react and decide the law isn’t strong enough.
“There’s a perception that there are people who want to profit from the pharmaceutical industry, and if they feel they haven’t gotten their profits yet, they’ll keep working until they do,” Meekins said.
