While lawmakers are busy debating details of the reconciliation bill that may take a serious stab at drug prices, pharmaceutical companies are hustling out a defense. On earnings calls over the last two weeks, the leaders of Gilead Sciences, Johnson & Johnson, Novartis, AbbVie and more have voiced concern—and some optimism—about the developing drug pricing package.
One notable defense? The legislation wouldn't bring drug price negotiations in Medicare, a prominent pharma CEO said late last week. Instead, it would introduce price controls, he said.
As it stands, the legislation would allow Medicare to set prices for 10 medicines in 2026, with the number growing to 60 by 2029, analysts with SVB Leerink wrote to clients late last week. In 2026 and 2027, Medicare would only control Part D drug prices, but in 2028, it could also negotiate prices in Part B, the analysts said.
The bill would also limit per-patient out of pocket costs at $2,000 per year in Medicare, and it would shift more responsibility for paying expenses beyond that point onto payers, the analysts said. The latter change could drive payers to “apply more utilization management and extract greater rebates from manufacturers,” the SVB team concluded, which could hurt the drug industry.
Top pharma companies aren't taking the changes sitting down. During recent earnings calls, execs have voiced their concerns about the Medicare "negotiations" component of the reconciliation package, with one CEO challenging the notion that this bill would even allow for back-and-forth pricing talks.
On a Friday conference call, AbbVie CEO Richard Gonzalez pointed out that the legislation would force manufacturers to accept the government’s proposed price or face a harsh tax on their revenues from a given product.
“So, it's not a negotiation,” Gonzalez said. “We should just call it what it is. It's price controls is what they're basically putting in place if the language stays the same.”
Still, Gonzalez and others support the Medicare out-of-pocket cap proposed in the package.
Novartis CEO Vas Narasimhan said he saw “good and bad elements” within the proposals. On one side, Narasimhan said capping patients’ out-of-pocket costs would be a “positive step.”
But on the flip side, Medicare price negotiations “go too far and don't support long-term innovation,” Narasimhan said.
Bristol Myers Squibb CEO Giovanni Caforio also had a mixed view of the legislation. BMS supports certain measures such as the out-of-pocket cap that “improve affordability for patients,” Caforio said.
But the Medicare price setting element would “obviously have the potential to have a negative impact on innovation overall,” the CEO added.
Adding on, J&J CEO Joaquin Duato said, “Medicare price setting will have a chilling effect in innovation that will be translated in less new medicines for patients.” If passed, the bill would have a “detrimental effect on the ability of the industry … to be able to invest in R&D and to develop new medicines.”
Gilead CEO Daniel O'Day said the process is still playing out and that Gilead is "actively involved" in supporting measures to improve patient affordability. He warned the price negotiation component sets a "dangerous precedent" for future innovation.
So far, the full text of the package is still not public, so pharma companies and analysts are going off of the available details. As of late last week, the SVB Securities analysts said Eli Lilly, AstraZeneca, AbbVie and J&J were particularly vulnerable to the proposed legislation in the Big Pharma world.
Looking ahead, the analysts were waiting to see whether the Senate parliamentarian supports the excise tax to force companies into negotiations, or the "teeth" of the bill that would give Medicare its proposed powers. Plus, the Senate goes on recess at the end of the week, so the process may be playing out over the span of several weeks and months.