Amgen, Roche and Regeneron set to suffer biggest hits from Trump pricing plan: report

Certain meds from Amgen, Roche and Regeneron could feel the effects of the new Trump administration's pricing plan. (Pixabay)

The pharma industry isn't too happy with HHS Secretary Alex Azar's plan to force discounts on Medicare Part B drugs. But some companies—and their blockbuster products—are set to feel a greater share of the pain.

Square in the administration's crosshairs are dozens of physician-administered drugs that accounted for billions in Medicare spending, topped by Big Pharma stalwarts such as Roche's Rituxan and Amgen's Neulasta.

The Trump administration aims to use an international pricing index to push prices for Part B drugs down toward the much lower prices paid in other countries. If Medicare had used average international prices in 2016, it would have saved $8 billion on a set of 27 drugs, an HHS report concluded, adding that those drugs were about 80% more expensive in the U.S. than in comparable countries.

But savings for Medicare mean losses for drugmakers. At average prices in 2016, Roche would have taken a $1 billion-plus hit on Rituxan sales and an $852 million blow to its eye drug Lucentis. Sales of Amgen’s white blood cell booster Neulasta would have plunged by $946 million, while its bone med Xgeva would have suffered an $849 million cut. For Regeneron’s Eylea, the discount would have amounted to $892 million.

Together, the pricing index would have saved Medicare—and cost the companies—$4.5 billion on those five drugs.

With its plan, HHS wants to reduce U.S. prices by “about 30%,” according to Bernstein analyst Ronny Gal, to arrive at an average figure of 126% of international prices. The proposal would take effect in half of the U.S. beginning in spring 2020, with discounts mounting every year for five years, Gal said. In the meantime, Gal said his team sees the “progress of this plan as the key debate for drug stocks in 2019.” 

PhRMA is pushing back. Right after the president's speech last week, Stephen Ubl, CEO of the industry trade group, said in a statement that the “administration is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation.” Ubl added that the proposals hurt American patients and PhRMA is “disappointed the administration put the needs of patients aside with these proposals.” 

HHS, in an online post, countered that it is proposing "no changes to the Medicare benefit, just more discounts from drug companies."

In a note, Cowen Washington Research Group's Rick Weissenstein, healthcare and pharma managing director,  wrote that the “good news for the companies most affected by this proposal is it is unlikely to be implemented as written.” He believes the plan should be seen as an “opening bid” from the administration and will likely face opposition from doctors, hospitals and patient groups, as well as pharmaceutical companies.  

“Implementing it only months before a presidential election strikes us a political suicide and we think a later date, if ever, is more likely,” Weissenstein added.

Last week's Part B pricing proposal is the latest plan from the Trump administration to attack high drug prices. In May, the administration rolled out its drug pricing blueprint, aiming to boost pricing negotiations and competition for drugs, plus provide incentives for lower list prices and to reduce out-of-pocket costs for patients. 

The Centers for Medicare and Medicaid Services has since rolled out a plan to allow Medicare Part B plans to implement step therapy for new patients—which forces them to try lower-cost alternatives first—and negotiate prices with drugmakers. HHS, meanwhile, is pushing ahead with an initiative to force drug prices in TV ads, and the FDA is approving a record number of generic drugs. 

Editor's note: This story was updated with analysis from Cowen's Rick Weissenstein.