After the pharma industry took a loss with the passage of the Inflation Reduction Act, companies are scouring for ways to blunt the new law’s effects. As the incoming chair of the powerful trade group PhRMA, Novartis CEO Vas Narasimhan has ideas about how the industry should respond.
Passed last year, the IRA will allow the government to negotiate prices on the costliest drugs in Medicare starting in 2026. It also forces companies to pay rebates if they raise Medicare drug prices faster than the rate of inflation, and it sets an out-of-pocket cap for patients in Medicare, among other changes.
To Narasimhan, there are three “core priorities” that the biopharma industry should target while the law is still being rolled out.
One is to “correct” the distinction allowing the government to negotiate prices on small-molecule drugs after nine years on the market. That's 4 years faster than the government will be able to negotiate prices for large-molecule biologics under the IRA.
This difference in negotiation timelines will discourage investment in small molecules, which are generally cheaper than more complicated biologics, drugmakers have argued.
Some therapeutic areas—such as cardiovascular diseases—require a longer launch ramp before a drug’s sales meaningfully tick up, Narasimhan pointed out. Further, the development of cancer drugs almost always starts with late-line treatment before moving to earlier, larger populations.
These factors could discourage investment in small-molecule meds, he said.
Compared with biologics, small molecules take up a larger proportion of Novartis’ business. Most notably, the company’s heart failure therapy Entresto, with $4.64 billion sales in 2022, is vulnerable to price negotiations when the policy kicks off in 2026. Some of the company’s recent key launches, including cholesterol-lowering RNA interference therapy Leqvio and radioligand prostate cancer therapy Pluvicto, also belong to the small-molecule group despite their advanced technologies.
Another item high on the industry’s agenda, the PhRMA chair-elect said, is to push pharmacy benefit manager reform. The pharma industry has long lamented that it has been unfairly shouldering the blame for rising drug prices, while drug middlemen have gone without as much scrutiny.
The third area of focus for Narasimhan is more scrutiny of hospital profits. He called for continued efforts to improve the U.S. government’s 340B drug program, which mandates big discounts from drug manufacturers to qualified clinics and hospitals.
The pharmaceutical industry has argued that the discounts actually benefit those healthcare facilities instead of patients. Several companies have challenged the program's requirements in the courts.
As incoming PhRMA chair, Narasimhan is succeeding Takeda’s global portfolio division president and former U.S. chief Ramona Sequeira.