To combat or adapt? That is the question facing pharma leaders as the Center for Medicare and Medicaid Services inches closer to implementing drug pricing measures enacted in the Inflation Reduction Act.
While many in the industry have publicly attacked the law, Merck became the first company to legally challenge it this month when it asked the U.S. District Court of the District of Columbia to declare Medicare’s new authority to negotiate drug prices unconstitutional. Few expect the rest of the industry to accept the measure without a fight, but whether other companies will follow suit with legal action or instead wage a lobbying crusade in Congress remains to be seen.
At a webinar hosted by J.P. Morgan on Wednesday, Steven Ubl, CEO of PhRMA, said the industry group is conducting research to identify specific adverse impacts of the law to use as leverage with lawmakers, and is working with the CMS on implementation. But he added that the organization hasn’t ruled out litigation yet.
Among the industry’s top concerns is a provision that grants biologic medications 13 years of exclusivity and small molecule drugs only nine years of exclusivity before they are subject to government price negotiations, he and others on the webinar panel said.
David Ricks, CEO of Eli Lilly and Co., called the measure “the fundamental defect” of the law and argued that if it were addressed the IRA would “do less damage.”
“The Congressional Budget Office estimated there'd be like 15 fewer drugs after 10 years. I can tell you after nine months, there's three fewer Lilly drugs,” Ricks said. “We're 5% of the U.S. market, so their estimate is off by orders of magnitude, in terms of how much effort will go into small molecule innovation.”
If the law is implemented as is, Ricks said Lilly would review its strategy and adapt in three ways: increase the ratio of biologics it develops, accelerate development and incur extra risk for certain small molecule programs, and in some cases, pursue development of two molecules with staggered plans to “spread their bets.” While the latter would increase research costs and prove inefficient for generics production down the line, he argued it would keep the business attractive for investors.
“Bigger companies have more degrees of freedom. We can do all these things and move our bets around. Single-product, early-stage companies are in a much tougher spot,” he said.
Implementation of the IRA is just one of the many quandaries facing executives in the life sciences right now. Here’s a look at some of the other major issues coloring C-suite conversations in pharma.