Amgen, J&J most vulnerable to IRA price negotiations in 2026: Moody's

Now that the Centers for Medicare & Medicaid Services (CMS) has revealed its list of the first 10 drugs subject to Medicare price negotiations under the Inflation Reduction Act (IRA), it’s time to consider the financial implications for the affected companies.

In 2026, the initial year of Medicare price negotiations, the overall impact will be “modest,” according to a recent report from Moody’s Investors Service. But for some companies, the pain could be more acute.

Industrywide, the financial effects of the negotiations will grow over time. In 2027 and 2028, 15 drugs will be added to the list each year, leading to 2031 when 100 drugs will be subject to price negotiations.

The product most impacted in 2026 is likely to be Bristol Myers Squibb and Pfizer’s blood thinner Eliquis, Moody's said. The drug accounted for $16.5 billion in Medicare Part D spending from June 2022 to May of this year, more than twice as much as any other.

While $16.5 billion was what Medicare Part D said it spent on Eliquis, the companies listed 2022 U.S. net sales of the drug at only $7.8 billion. Accounting for the difference are significant rebates and discounts, Moody's analyst Michael Levesque explained.

With the oncoming price reduction, it is the net sales of Eliquis that will be exposed. In the case of Pfizer, its U.S. sales of Eliquis account for 9% of the company’s revenue. For BMS, the figure is 8%.

The drugmaker exposing its largest chunk of revenue to 2026 price negotiations, according to Moody’s, is Amgen at 15%. The company’s U.S. sales from Enbrel reached $4 billion in 2022, but those are expected to decline by 2026 with the introduction of newer immunology treatments.

The only other company Moody’s expects to have double-digit revenue exposure to price negotiations in 2026 is Johnson & Johnson at 13%. J&J is also the only drugmaker with more than one product on the list.

For J&J, the biggest hit will come from immunosuppressant Stelara, which generated sales of $6.4 billion in the U.S. last year, representing 8% of J&J’s net revenue.

Smaller hits will come to sales of blood thinner Xarelto, which reached $2.5 billion last year in the U.S., and blood cancer drug Imbruvica, which J&J shares with AbbVie and registered $3.4 billion in sales in 2022. Imbruvica’s revenues are expected to decline significantly by 2026, Moody’s points out, because of formidable competition from BeiGene’s Brukinsa and AstraZeneca’s Calquence.

None of the other drugs on the CMS list had U.S. sales last year that accounted for at least 5% of company revenue, so their exposure to price negotiations won’t be as pronounced. Those products include Novartis’ Entresto, Merck’s Januvia, AZ's Farxiga and Novo Nordisk’s NovoLog.

The next big date in the process is September 2024, which is when negotiated prices will be identified. There will be limitations on how much the CMS can cut prices, depending on the market life of the drug.

Still, much has yet to be decided as several of the companies with drugs on the list—including AZ, BMS, J&J, Novartis and Merck—have filed separate lawsuits against the government, claiming Medicare price negotiations violate their constitutional rights.