Genentech CEO Alexander Hardy warns of 'unintended consequences' from the Inflation Reduction Act

It’s been almost one year since Congress and the Biden administration passed the Inflation Reduction Act (IRA), and so far leaders in the biopharma industry have not been shy in voicing their complaints. As some drug companies and trade groups take to the courts with their arguments, Genentech CEO Alexander Hardy is publicly warning about the “unintended consequences" of the IRA.

In a recent interview with Fierce Pharma, the Genentech chief described his concerns with measures included in IRA, which particularly affects the oncology sector, he says.

Under the IRA, small molecule drugs are subject to Medicare drug-pricing negotiations after 9 years, while biologics get 13 years on the market before they're included in the program. Regardless of a drug's classification, Hardy noted that those timelines squeeze companies as they work to study their drugs in additional indications and reach more patients.

Companies like Genentech regularly work to move their cancer meds from late stages of disease to earlier settings in an R&D process that takes many years. Hardy cites his company’s Herceptin, which took seven years to score a nod for early breast cancer after a breakthrough approval for metastatic breast cancer in 1998.

On the IRA's 9- and 13-year negotiation timelines, Hardy said they will force companies to operate within a "very, very short amount of time."

Since the law's introduction last year, pharma executives have warned that IRA will affect their R&D decision-making. Eli Lilly, for one, scrapped a $40 million small molecule asset from its pipeline last fall. Further, Novartis’ CEO Vas Narasimhan told Barron’s in April that his company scratched development of some early-stage cancer drugs.

Like its peers, the IRA will force changes around which drugs Genentech chooses to pursue and which indications it'll target, Hardy says.


The all-important first indication


The countdown to Medicare negotiations starts at a drug’s first approval, meaning the first indication companies target is a crucial decision. In some cases, the specific application that could get a medicine to patients the quickest isn’t necessarily the indication with the largest patient pool. This dynamic forces drugmakers to make tough choices about return on investment and speedy patient access to new therapies, pharma industry representatives have said.

“These are not the sorts of dilemmas we like to have to make,” Hardy said in the interview. “We’d like to put the patient first. But now we’re trying to figure out how to make a return with a nine-year clock.”

The CEO is one of many industry leaders trying to make sense of the drug pricing negotiations that the IRA gave to the Centers of Medicare and Medicare Services (CMS). The law is “really quite broad” and “leaves a lot undefined,” he said. At this point, Hardy said he’s looking to ensure that the pricing negotiations don’t stamp out innovation.

Despite his concerns, the chief remains hopeful about potential improvements to the IRA. 

Genentech is focusing on working with CMS and Congress to “offer changes” to the framework, Hardy said. For one, Hardy said he’d like to see negotiation come into play after a rare disease drug’s second indication as opposed to its first, as well as some “technical fixes” on the biosimilar front to provide more clarification to those manufacturers.

Still, the company is “actively considering” legal options as well, Hardy said. If Genentech files a lawsuit, the drugmaker will join a growing list of companies and groups challenging IRA in the courts.

Merck started the wave of legal action with a bombshell lawsuit levied at the Department of Health and Human Services (HHS) in early June. Bristol Myers Squibb followed with similar litigation, while trade group Pharmaceutical Research and Manufacturers of America (PhRMA) and two other groups joined the list with their own lawsuit late last month. Other industry leaders such as Biogen’s CEO Chris Viehbacher have publicly supported the moves.