Resident scholar at The American Enterprise Institute for Public Policy Research
- Healthcare provisions listed in the Inflation Reduction Act and ramifications for the pharmaceutical and biotechnology industries
- CBO (Congressional Budget Office) scoring process
- Drug pricing and potential legal pushback from big pharmaceutical and biotech companies
Can you explain the Inflation Reduction Act’s criteria as it relates to Part D and Part B drugs with the respect of FDA approval dates?
It says under the Inflation Reduction Act, brand name and biologic drugs without a generic or biosimilar equivalent covered under Medicare Part D or Part B that are among the highest-spending Medicare-covered drugs, and which are nine or more years from FDA approval – that’s for small-molecule drugs. For biologics it’s 13 or more years from FDA approval. When you think about drug patent protection, it’s granted for 20 years, but from what date? It’s from the date of the patent application filing, but quite often, 50% of that time elapses before the companies can even commercially launch a drug, given the complexity of bringing these drugs to market successfully. Given the provisions, on average, if we assume you hit the market 10 years after you file, they can’t negotiate until they’ve been on the market for another nine years – that’s for small molecule. Does it seem to intimate that this isn’t going as far as it should? My read is that it doesn’t really have teeth if the LOE [loss of exclusivity] is only one year away.
Can you quickly walk us through the sequencing beginning in 2026 with Part D, then subsequently with Part B?
How will life-cycle mitigation strategies potentially be approached? I typically fall on the side of industry, but having followed healthcare for 20 years now, when they tweak a formulation right at the end of a patent and launch a new drug that is pretty much the same thing, then migrate all the patients over to it, I find that incredibly frustrating. It’s great for the companies and shareholders, but terrible if you care about how we spend our healthcare dollars. Any idea of how they’re going to look at that practice as we implement this rule?
Common-sense approaches make a great deal of sense, but why did it take a reconciliation process and a blunt-force instrument such as this law vs all the other attempts to appropriately reform in a more optimal way, possibly, because of the parliamentarian rules? It’s frustrating.
You alluded to your surprise that Part D started before Part B. I understand why you said that, because Part B is a mess and has a lot more issues than Part D, but bigger picture, if you look at the spend by Medicare, the top 10 drugs on Medicare Part D vs Part B are USD 39.4bn vs USD 15.2bn respectively. Naturally they went after Medicare Part D because the spend rate is so much higher, but I think what you would argue is it’s more appropriate spend. The Medicare Part B, especially with the 340B programme is a real disappointment – it was meant to help disadvantaged people but has been completely bastardised. The nuance of the provision stipulated “limited to”, which I think was largely glossed over and probably rightfully so. We’re saying, “There are going to be 10 in FY26, there are going to be so many in FY27 and so forth,” but it could be none. The wording is “limited to” vs “required to be”. Is it fair to say the number of drugs will be maximised every year?
Did you want this law to have teeth? Many people didn’t think this bill went far enough and would like to see more. How would you want to see the regulations written? Conversely, if you were a pharmaceutical lobbyist representing your client’s interest and you wanted to make sure there were loopholes and wiggle room, how might the pharma companies try to affect those preferential regulatory stipulations?
My main concern in terms of the ripple effect is the government negotiates some draconian discount – whether deserved or not – but what’s the lateral to the commercial pricing? Do you think commercial pricing is already a lot lower?
What can you tell us about the buy-and-bill methodology in the 340B programme? Why was the programme started and why is its execution troubling?
The law requires drug manufacturers to pay rebates to Medicare if they increase prices faster than the inflation for drugs used by Medicare beneficiaries. Looking at 2019-20 data, half of the drugs covered by Medicare had price increases above the rate of inflation over that period. When you look back at these drugs, among those with price increases above the rate of inflation, one-third had price increases of 7.5% or more – that was well over where the annual inflation rate was at the time. How do you think this provision will be implemented and how will the inflation rebate work?
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